A1194
Title: The impact of carbon pricing on electricity prices and volatility: evidence from the Italian power market
Authors: Pierdomenico Duttilo - University of Padova (Italy) [presenting]
Francesco Lisi - University of Padova (Italy)
Abstract: Carbon emissions are a major driver of global climate change, with the power sector among the largest contributors. Emissions from electricity generation depend on the balance between renewable and fossil fuel sources, which are influenced by both market dynamics and weather variability. Carbon pricing and emissions trading have emerged as central policy instruments to reduce emissions worldwide. Since its introduction in 2005, the European Union Emissions Trading Scheme (EU ETS) has required participating firms to surrender allowances for their greenhouse gas emissions, with each allowance granting the right to emit one tonne of CO2-equivalent. The aim is to examine the impact of carbon pricing on electricity prices and price volatility in the Italian power market. By modelling the conditional mean and variance of electricity price using parametric and non-parametric approaches, it demonstrates how carbon costs influence market behavior and shape electricity market dynamics.
