The effects of removing natural gas power plants from the EU ETS 1

In light of rising energy prices, there is currently a debate on how to reduce electricity costs in Europe. One proposal is to exclude electricity generation from natural gas from the European Union Emissions Trading System (EU ETS). The aim would be to make electricity cheaper.

However, such interventions would entail considerable risks. The analyses presented here show that, whilst excluding gas-fired power stations from emissions trading may lower electricity prices in the short term, it would simultaneously create new problems: gas consumption could rise, prices on the gas market could increase, and distortions in electricity trade between EU countries would arise. Overall, the effects would be complex and difficult to control. Furthermore, such interventions could undermine the stability and reliability of the energy policy framework, thereby jeopardising vital investments in the energy transition.