Analysis of Cost Curves of Companies in Power & Heat Sector on the European Market Depending on the Carbon Allowances
| Název práce v češtině: | Analýza nakladových křivek firm v sektoru Power & Heat v závislosti na emisních povolenkách na evropském trhu |
|---|---|
| Název v anglickém jazyce: | Analysis of Cost Curves of Companies in Power & Heat Sector on the European Market Depending on the Carbon Allowances |
| Klíčová slova: | Cost Curves, European Market, Carbon allowances, Power & Heat sector |
| Akademický rok vypsání: | 2021/2022 |
| Typ práce: | bakalářská práce |
| Jazyk práce: | angličtina |
| Ústav: | Institut ekonomických studií (23-IES) |
| Vedoucí / školitel: | RNDr. Michal Červinka, Ph.D. |
| Řešitel: | skrytý - zadáno vedoucím/školitelem |
| Datum přihlášení: | 03.09.2022 |
| Datum zadání: | 03.09.2022 |
| Datum a čas obhajoby: | 13.06.2023 09:00 |
| Místo konání obhajoby: | Opletalova, O314, místnost. č. 314 |
| Datum odevzdání elektronické podoby: | 03.05.2023 |
| Datum proběhlé obhajoby: | 13.06.2023 |
| Oponenti: | Diana Kmeťková, M.Sc. |
| Zásady pro vypracování |
| Research question and motivation
The main research question of this thesis is whether cost curves of individual companies can be modeled as simple polynomial functions of key factors. In particular, we plan to study the relationship between the total amount of output produced and the costs of individual company including emissions as a cost. In the context of recent years, questions about sustainability and future start to arise more frequently. One term that is frequently used in while debating about these questions is carbon dioxide. The overall trend is to gradually decrease the amount of carbon dioxide emitted to minimum. However, many sectors of market that influence life of almost all people in the world are dependent on emitting carbon dioxide. One of the most important sectors is Power & Heat. In the upcoming years, mankind will probably not be able to go fully sustainable in this sector. Therefore, there is a need for regulation of carbon dioxide emitted. One of the regulations is EU ETS (European Union Emissions Trading System), that allows EU to control the volume of emission via carbon allowances. Since carbon allowances are tradeable, they constitute valuable assets for any company that is emitting carbon dioxide. Hence, it is interesting to study how does owning carbon allowances reflects into cost curves, and, what are the other significant parameters that influence cost curves. The research is based on data set from Carbon Market Database. This data set contains information about 19 sectors in Europe such as Cement & Lime, Power & Heat, Iron & Steel, etc. The data is collected since 2005 and includes 1014 records. There are 286 records regarding the Power & Heat sector, however, we plan to take into an account just a sample of companies companies, containing roughly 65 of them, which, however, makes up for more than 80% of allocated allowances in the sector considered. Contribution The contribution of the thesis is twofold. We plan to confirm that cost curves can be modeled as simple polynomial functions of the input factors, i.e. of the output produced, at best as a linear or quadratic function. For this purpose we plan to employ tools of linear regression Subsequently, the results of this thesis will directly influence the structure of much more advanced models for pricing of emission allowances and illuminate differences in effectiveness of emission allowances and carbon tax systems, which however goes beyond the scope of the thesis. In addition, there is not a lot of existing literature related to this topic, and therefore, my research should contribute to development of interest in this topic. Methodology We use data from Carbon Market Database, more specifically European Emission Trading System (EU ETS) database for Power & Heat sector. This database provides information about parameters such as number of installations and number of allocated allowances. To include more parameters in the analysis, I will use annual reports of each individual firm and extract financial statements of the company. This part must be done manually, and the data set will include information about approximately 65 companies. Once the construction of a data set is complete, we will consider two types of linear regression models for each individual company. In the first one, we plan to uncover relationship between production costs as a function of output produced along with other factors available in annual reports and Carbon Market Database. The second model is focused to uncover the form of a technology function which links the costs for emission allowances required and the output produced. |
| Seznam odborné literatury |
| Wooldridge, J.M. (2013). Introductory Econometrics : A Modern Approach. 5th ed. Mason Cengage Learning.
Bloessa, A.; Schillb, W.-P.; Zerrahnb, A. (2018). Power-to-heat for renewable energy integration: A review of technologies, modelling approaches and flexibility potentials. Elsevier. https://www.sciencedirect.com/science/article/pii/S0306261917317889?fbclid=IwAR3VFlErLGoDyTkMnWdum2UKy8qnhjEecU2f8-qcaiKnPXY6R0KxD7b9tGA Aldy, J.E.; Stavins, R.N. (2012). The Promise and Problems of Pricing Carbon: Theory and Experience. https://scholar.harvard.edu/files/stavins/files/aldy_stavins_pricing_carbon_in_jed.pdf Heine, D.; Semmler, W.; Mazzucato, M.; Braga, J.P.; Flaherty, M.; Gevorkyan, A.; Hayde, E.; Radpour, S. (2019). Financing Low-Carbon Transitions trough Carbon Pricing and Green Bonds. https://documents1.worldbank.org/curated/en/808771566321852359/pdf/Financing-Low-Carbon-Transitions-through-Carbon-Pricing-and-Green-Bonds.pdf Zapletal, F.; Šmíd, M.; Kozmík, V. (2022). Multi-stage stochastic optimization of carbon risk management. To appear in Expert Systems with Applications. https://doi.org/10.1016/j.eswa.2022.117021 |
| Předběžná náplň práce |
| Abstract
Introduction a. Why the topic is interesting b. Introduction to carbon allowances c. Introduction to Power & Heat sector d. Structure of the thesis Methodology a. Description of the data b. How the tests were performed Results a. Rejecting / not rejecting the hypothesis b. My interpretation of the results Conclusion a. What are the implications that can be used in practice |
| Předběžná náplň práce v anglickém jazyce |
| Abstract
Introduction a. Why the topic is interesting b. Introduction to carbon allowances c. Introduction to Power & Heat sector d. Structure of the thesis Methodology a. Description of the data b. How the tests were performed Results a. Rejecting / not rejecting the hypothesis b. My interpretation of the results Conclusion a. What are the implications that can be used in practice |