CO2 Emissions Trading System in the Context of an Open International Electricity Market

The topic was presented by Jean-Pierre Bourdier, Director for the Environment at Electricité de France and Chairman of the EURELECTRIC Working Group on Climate Change.

In December 1997, in Kyoto (Japan), a number of developed countries undertook to achieve a series of ambitious targets essentially via the implementation of appropriate mechanisms, the so-called Kyoto mechanisms.

The European electricity industry wanted to understand how the mechanisms might work and carried out a simulation exercise with the help of the International Energy Agency and the Paris Bourse company which runs the Paris Stock Exchange.27% of the emissions of CO2 – the gas which makes the greatest contribution to the greenhouse gas effect that could bring about climate change – in the European Union comes from the production of electricity. By exchanging very substantial amounts of current, the electricity producers are already reducing the amount of CO2 released, since these exchanges, which are dictated by cost considerations, make it possible to reduce the quantities of fuels with a high carbon content burned in the power stations.

The main question was to determine how the CO2 emissions trading system – one of the Kyoto mechanisms – would make it possible to reduce the overall cost of meeting the Kyoto undertakings.The practical aim of the simulation was to look into the advantages of the joint marketing of CO2 and of electricity, thereby helping to refine the concept of the Kyoto mechanism which will one day have to be implemented.