Government tasks and impact study regarding CO2 emission trading in HungaryUploaded: 1 of January, 2005

Two studies were prepared on the governmental tasks and incurring budget effects of the EU CO2 emissions trading system. The first study introduces the theoretical basics of emissions trading, the main economic foundations, the assessment of the 2003/87/EC Directive and its regulatory aspects. It shows that the scarcity of CO2 emissions rights results in a rent and therefore the distribution of this rent is a regulatory task. Additionally, the alternative distribution options are discussed from a theoretical aspect. The paper shows that climate change causes extra tasks for the government and hence requires new funding sources. The establishment of the new emissions regulation is an opportunity for reducing the distortion of the current tax system.

The second study analyses the effects of CO2 emissions trading in the Hungarian electricity market in general and on the licensed electricity producers on the basis of the Hungarian National Allocation Plan. The electricity market effects study covers on one hand the position development of electricity producers, on the other its effects on electricity buyers. For the analysis of the CO2 regulation the study uses a static partial equilibrium model and shows the expected demand and supply effects on the electricity markets. With the different values of the important market and regulatory model parameters the study defines different scenes, and thus analyse the various outcomes.