Critical analysis of the European Union directive which regulates the use of biofuels: An approach to the Spanish case

For more than a decade we have lived in a period where the so-called “sustainability” is crucial and is motivated primarily by the social awareness of achieving a balance between human development and the conservation of the environment. This philosophy has a direct and inevitable impact on business and politics. Governments have long since been developing standards and encouraging various diverse initiatives whose aim is to defend the environment.In recent times, the global debate on the environment has been centred on CO₂ emissions. This gas is the major cause of the “greenhouse effect” and people are more concerned with the idea that the emissions of this gas should be minimized. As a result of this concern, the Kyoto Protocol was enacted and subscribed to by many countries, setting the maximum gas emissions for them.Fossil fuels are a major source of CO₂ emissions. In 2003 the European Union (EU) directive 2003/30/EC [2003/30/EC Directive of the European Parliament and the Council—8th may 2003. On the promotion of the use of biofuels or other renewable fuels for transport] was developed with the aim of promoting the use of biofuels as a substitute for diesel or petrol among European Union countries as well as to contribute to fulfilling the commitments on climate change, security of supply in environmentally friendly conditions and the promotion of renewable energy sources.In order to achieve these goals, the directive forces all EU members to ensure that at least 5.75% of all petrol and diesel fuels sold for transport purposes are biofuels before December 31 of 2010. European Union countries have social and economic characteristics unique to themselves. The energy dependence from foreign sources, the features of the agricultural sector or the degree of industrialization varies greatly from one country to another. In this context, it is questionable whether the obligation imposed by this directive applies to achieve uniform and/or identical goals in each of the countries involved and whether the actions of the various governments are also aligned with these goals.     

Stimulating the use of biofuels in the European Union: Implications for climate change policy

The substitution of fossil fuels with biofuels has been proposed in the European Union (EU) as part of a strategy to mitigate greenhouse gas emissions from road transport, increase security of energy supply and support development of rural communities. In this paper, we focus on one of these purported benefits, the reduction in greenhouse gas emissions. The costs of subsidising the price difference between European bioethanol and petrol, and biodiesel and diesel, per tonne of CO₂ emissions saved are estimated. Without including the benefits from increased security of energy supply and employment generation in rural areas, the current costs of implementing European domestic biofuel targets are high compared with other available CO₂ mitigation strategies. The policy instrument of foregoing some or all of the excise duty and other taxes now applicable to transport fuels in EU15 on domestically produced biofuels, as well as the potential to import low-cost alternatives, for example, from Brazil, are addressed in this context.     

Dazzled by diesel? The impact on carbon dioxide emissions of the shift to diesels in Europe through 2009

This paper identifies trends in new gasoline and diesel passenger car characteristics in the European Union between 1995 and 2009. By 2009 diesels had captured over 55% of the new vehicle market. While the diesel version of a given car model may have as much as 35% lower fuel use/km and 25% lower CO₂ emissions than its gasoline equivalent, diesel buyers have chosen increasingly large and more powerful cars than the gasoline market. As a result, new diesels bought in 2009 had only 2% lower average CO₂ emissions than new gasoline cars, a smaller advantage than in 1995. A Laspeyres decomposition investigates which factors were important contributors to the observed emission reductions and which factors offset savings in other areas. More than 95% of the reduction in CO₂ emissions per km from new vehicles arose because both diesel and gasoline new vehicle emissions/km fell, and only 5% arose because of the shift from gasoline to diesel technology. Increases in vehicle mass and power for both gasoline and diesel absorbed much of the technological efficiency improvements offered by both technologies. We also observe changes in the gasoline and diesel fleets in eight EU countries and find changes in fuel and emissions intensities consistent with the changes in new vehicles reported. While diesel cars continue to be driven far farther than gasoline cars, we attribute only some of this difference to a “rebound effect”. We conclude that while diesel technology has permitted significant fuel savings, the switch from gasoline to diesel in the new vehicle market contributed little itself to the observed reductions in CO₂ emissions from new vehicles.     

CO2 benefit from the increasing percentage of diesel passenger cars. Case of Ireland

The decrease of CO₂ emissions is one way to minimize climate changes. An efficient way to decrease these emissions is the replacement of gasoline passenger cars (PCs) by diesel ones, which emit less CO₂. Most of the member countries of the European Union (EU) have high percentages of new diesel PC registrations; however, this percentage remains less than 17% in Ireland. The benefit on CO₂ emitted from new PCs is studied in the case of an increased diesel penetration in Ireland, after several scenarios using the current and estimated future PC sales and estimated fuel consumption. The results show that, in the case of new PCs, a CO₂ benefit of more than 2.9% can be achieved, if a diesel penetration higher than 30% occurs in the case of the current fleet. If this penetration reaches 50%, this benefit will be higher than 7.4%. Future total CO₂ emissions from new PCs can be partially controlled by the introduction of diesel PC or the replacement of heavy PCs by lighter ones. Future fuel consumption of gasoline and diesel PCs and the percentage of diesel penetration are the key factors for this control.     

CO2 emissions change from the introduction of diesel passenger cars: Case of Greece

An efficient way to decrease the CO₂ emissions is the replacement of gasoline passenger cars (PC) by diesel ones, which emit less CO₂. This can be more effective in Greece where the percentage of new diesel PC remains less than 1%, contrary to the other countries of the European Union, which have high diesel penetrations. The benefit of CO₂ emitted from new PC is studied in the case of an increased percentage of diesel PC in Greece, using several scenarios taking into account the current and future new car registrations and fuel consumption. The results show that a CO₂ emission reduction of more than 5.2% can be achieved if a diesel penetration higher than 30% occurs in the case of current fleet. If the penetration reaches 50%, this benefit is higher than 10.5%. Exhaust CO₂ emissions from future new PC will increase significantly in this country and can be partially controlled by the introduction of diesel PC.     

How much can CO2 emissions be reduced if fossil fuel subsidies are removed?

This paper analyzes consumers' price elasticities of demand for fossil fuels, and how a reduction of fossil fuel subsidies can lead to important reduction in CO₂ emissions for various groups of countries that have relatively high fossil fuel subsidies and notably on diesel, including countries in the Middle East and North Africa (MENA). These countries continue to maintain significant levels of fuel subsidies, with Iran and Saudi Arabia being the largest contributors to CO₂ emissions. This paper illustrates that fuel price policy reforms by these countries would be an important instrument for both climate and economic policies. We estimate that a reduction in subsidies to both gasoline and diesel by about 20 US$ cents per liter will lead to significant decreases in CO₂ emissions, both in the MENA region and globally. In Iran, for example, the reductions could be up to 90% and 50% of current emissions generated from diesel and gasoline consumption, respectively, and for Saudi Arabia, approximately 70% and 40%, respectively.     

The perspectives of energy production from coal‐fired power plants in an enlarged EU

The aim of this paper is to present the current status of the coal‐fired power sector in an enlarged EU (EU‐15 plus EU member candidate states) in relation with the main topics of the European Strategy for the energy production and supply. It is estimated that 731 thermoelectric units, larger than 100 MW_e, are operating nowadays, and their total installed capacity equals to 200.7 GW_e. Coal contribution to the total electricity generation with reference to other fuel sources, is by far more intensive in the non‐EU part (EU member candidate states), compared to the EU member states. It is expected that even after the enlargement, the European Union will strongly being related to coal. Enlargement will bring additional factors into play in order to meet the requirements of rising consumption, growing demand for conventional fuels and increasing dependence on imports. Besides the technology, boiler size, efficiency, age and environmental performance will determine the necessities of the coal‐fired power sector in each country. Depending on the case, lifetime extension measures in operating coal‐fired power plants or clean coal technologies can play an important role towards the energy sector restructuring. Low efficiency values in the non‐EU coal‐fired units and heavily aged power plants in EU countries will certainly affect decisions in favour of upgrading or reconstruction. The overall increase of efficiency, the reduction of harmful emissions from generating processes and the co‐combustion of coal with biomass and wastes for generating purposes indicate that coal can be cleaner and more efficient. Additionally, plenty of rehabilitation projects based on CCT applications, have already been carried out or are under progress in the EU energy sector. The proclamations of the countries' energy policies in the coming decades, includes integrated renovation concepts of the coal‐fired power sector. Further to the natural gas penetration in the electricity generation and CO₂ sequestration and underground storage, the implementation of CCT projects will strongly contribute to the reduction of CO₂ emissions in the European Union, according to the targets set in the Kyoto protocol. In consequence, clean coal technologies can open up new markets not only in the EU member candidate states, but also in other parts of the world. Copyright © 2004 John Wiley & Sons, Ltd.     

Determination of ecological efficiency in internal combustion engines: The use of biodiesel

This paper evaluates and quantifies the environmental impact from the use of some renewable fuels and fossils fuels in internal combustion engines. The following fuels are evaluated: gasoline blended with anhydrous ethyl alcohol (anhydrous ethanol), conventional diesel fuel, biodiesel in pure form and blended with diesel fuel, and natural gas. For the case of biodiesel, its complete life cycle and the closed carbon cycle (photosynthesis) were considered. The ecological efficiency concept depends on the environmental impact caused by CO₂, SO₂, NO_x and particulate material (PM) emissions. The exhaust gases from internal combustion engines, in the case of the gasoline (blended with alcohol), biodiesel and biodiesel blended with conventional diesel, are the less polluting; on the other hand, the most polluting are those related to conventional diesel. They can cause serious problems to the environment because of their dangerous components for the human, animal and vegetable life. The resultant pollution of each one of the mentioned fuels are analyzed, considering separately CO₂, SO₂, NO_x and particulate material (PM) emissions. As conclusion, it is possible to calculate an environmental factor that represents, qualitatively and quantitative, the emissions in internal combustion engines that are mostly used in urban transport. Biodiesel in pure form (B100) and blended with conventional diesel as fuel for engines pollute less than conventional diesel fuel. The ecological efficiency for pure biodiesel (B100) is 86.75%; for biodiesel blended with conventional diesel fuel (B20, 20% biodiesel and 80% diesel), it is 78.79%. Finally, the ecological efficiency for conventional diesel, when used in engines, is 77.34%; for gasoline, it is 82.52%, and for natural gas, it is 91.95%. All these figures considered a thermal efficiency of 30% for the internal combustion engine.     

Which factors drive CO<Subscript>2</Subscript> emissions in EU-15? Decomposition and innovative accounting

This study breaks down carbon emissions into six effects within the 15 European Union countries group (EU-15) and analyses their evolution in four distinct periods: 1995–2000 (before European directive 2001/77/EC), 2001–2004 (after European directive 2001/77/EC and before Kyoto), 2005–2007 (after Kyoto implementation), and 2008–2010 (after Kyoto first stage), to determine which of them had more impact in the intensity of emissions. The complete decomposition technique was used to examine the carbon dioxide (CO₂) emissions and its components: carbon intensity (CI effect); changes in fossil fuels consumption towards total energy consumption (EM effect); changes in energy intensity effect (EG effect); the average renewable capacity productivity (GC effect); the change in capacity of renewable energy per capita (CP effect); and the change in population (P effect). It is shown that in the post Kyoto period there is an even greater differential in the negative changes in CO₂ emissions, which were caused by the negative contribution of the intensity variations of the effects EM, GC, CP and P that exceeded the positive changes occurred in CI and EG effects. It is also important to stress the fluctuations in CO₂ variations before and after Kyoto, turning positive changes to negative changes, especially in France, Italy and Spain, revealing the presence of heterogeneity. Moreover, the positive effect of renewable capacity per capita and the negative effect of renewable capacity productivity are the main factors influencing the reduction in CO₂ emissions during the Kyoto first stage. It is possible to infer from the results that one of the ways to reduce emissions intensity will be by increasing the renewable capacity and the productivity in energy generation and consequently through the reduction of the share of the consumption of fossil fuels.     

The price for biofuels sustainability

The production and usage of biofuels has increased worldwide, seeking goals of energy security, low-carbon energy and rural development. As biofuels trade increased, the European Union introduced sustainability regulations in an attempt to reduce the risks associated with biofuels. Producers were then confronted with costs of sustainability certification, in order to access the EU market. Hopes were that sustainably-produced biofuels would be rewarded with higher prices in the EU. Based on a review of recent literature, interviews with traders and price data from Platts, this paper explores whether sustainability premiums emerged and if so, did they represent an attracting feature in the market for sustainable biofuels. This article finds that premiums for ethanol and biodiesel evolved differently between 2011 and 2012, but have been in general very small or inexistent, with certified fuels becoming the new norm in the market. For different reasons, there has been an apparent convergence between biofuel policies in the EU and the US. As market operators perceive a long-term trend for full certification in the biofuels market, producers in developing countries are likely to face additional challenges in terms of finance and capacity to cope with the sustainability requirements.     

Bypassing Russia: Nabucco project and its implications for the European gas security

Restrictions on CO₂ emissions, the nuclear phase-out announced by some member states, high emissions from coal-fired power plants, and barriers to rapid development of renewable generation are factors that make the European Union (EU) highly dependent on natural gas. With three non-EU countries (Russia, Algeria and Norway) currently supplying more than half the gas consumed within the EU and with projections pointing out that by 2030 internal sources will only be able to meet 25% of demand, the EU desperately looks for means to secure new sources of gas supply. In this context, the Nabucco pipeline is planned to deliver gas from Caspian and Middle East regions to the EU market. It runs across Turkey and then through Bulgaria, Romania and Hungary before connecting with a major gas hub in Austria. On paper, Nabucco project makes perfect sense, offering a new export route to the EU markets for Caspian gas producers (Azerbaijan, Turkmenistan and Kazakhstan) as well as Iran and, in time, Iraq. The project is backed by the EU and strongly supported by the United States. Perhaps most importantly, Nabucco would completely bypass Russia. This paper addresses issues surrounding Nabucco project and their implications for the European gas security.     

A methodology for territorial distribution of CO2 emission reductions in transport sector

Greenhouse gas emission reduction is the pillar of the Kyoto Protocol and one of the main goals of the European Union (UE) energy policy. National reduction targets for EU member states and an overall target for the EU‐15 (8%) were set by the Kyoto Protocol. This reduction target is based on emissions in the reference year (1990) and must be reached by 2012. EU energy policy does not set any national targets, only an overall reduction target of 20% by 2020. This paper transfers global greenhouse gas emission reduction targets in both these documents to the transport sector and specifically to CO₂ emissions. It proposes a nonlinear distribution method with objective, dynamic targets for reducing CO₂ emissions in the transport sector, according to the context and characteristics of each geographical area. First, we analyse CO₂ emissions from transport in the reference year (1990) and their evolution from 1990 to 2007. We then propose a nonlinear methodology for distributing dynamic CO₂ emission reduction targets. We have applied the proposed distribution function for 2012 and 2020 at two territorial levels (EU member states and Spanish autonomous regions). The weighted distribution is based on per capita CO₂ emissions and CO₂ emissions per gross domestic product. Finally, we show the weighted targets found for each EU member state and each Spanish autonomous region, compare them with the real achievements to date, and forecast the situation for the years the Kyoto and EU goals are to be met. The results underline the need for ‘weighted’ decentralised decisions to be made at different territorial levels with a view to achieving a common goal, so relative convergence of all the geographical areas is reached over time. Copyright © 2011 John Wiley & Sons, Ltd.     

Towards a common renewable future: The System-GMM approach to assess the convergence in renewable energy consumption of EU countries

This paper investigates whether the contribution of renewable energy sources to primary energy consumption is characterized by a convergence process across core European Union (EU) countries over the period from 1990 to 2014. The System Generalized Method of Moments (GMM) methodology is employed for 5-year span panel data of 14 EU members. The findings indicate strong evidence for both the absolute (unconditional) and conditional convergence of renewables' share in primary energy consumption across EU-14 countries. Moreover, the control variables, namely CO₂ emissions per GDP, FDI inward stock and electricity prices contribute to the speed of convergence. Hence, the (implicit) rate of conditional convergence is higher than that of absolute convergence. The empirical evidence suggests that the energy mixes of core EU members have a tendency to become similar in the long-run as the shares of RES in primary energy consumption converge to the average level. Nonetheless, it does not necessarily imply that this average would be 20% target, which is to be achieved by 2020 according to EU directive 2009/28/EC.     

World trade in forest products and wood fuel

Wood fuel is a strategic resource for future energy supply and is usually utilised locally. Traditional use of wood fuel and other bioenergy has a share of 10–15% energy supply, used mainly for the household sector. The utilisation for industrial purposes is much smaller but is a strategic resource in the effort to fulfil the Kyoto agreement to replace fossil fuels and to mitigate greenhouse gas emissions. Many industrialised countries already use a significant share of biofuels in their energy supply e.g. Nordic countries while others like some other European Union countries are planning to increase their use. Production and use of biofuels need to be carried out sustainable. Official statistics do not report trade in such detail that international trade in different biomass types can be fully identified. However, FAO and European Forestry Institute are important sources. In some countries, there is a growing interest in the international trade, because the trade can provide biofuels at lower prices, larger quantities and better quality than domestic alternatives. The first signs of an international market price for wood fuel are indicated in Europe. For the future both the use and the trade of wood fuel is expected to increase. Analyses for trade in charcoal, wood chips, fuel wood and wood residues made in this report identify ‘hot’ trade spots in Europe, in south East Asia and in North America.     

Combustion,performance and emission analyses of a CI engine operating with renewable diesel fuels (HVO/FARNESANE) under dual-fuel mode through hydrogen port injection

The use of hydrogen in internal combustion engines is pointed out as an alternative to reduce greenhouse gas emissions. In applications that require high levels of torque and low engine speeds, compression ignition (CI) engines are more appropriate. However, because of the high auto-ignition temperature of hydrogen, its use in these engine types is more suitable when the dual-fuel concept is applied. This study comprehensively investigates, through experimental techniques, the use of hydrogen port-injection in a four-stroke single-cylinder CI engine operating with the renewable diesel-like fuels hydrotreated vegetable oil (HVO) and farnesane, in comparison to fossil diesel dual-fuel operation. In this sense, the present work aims to fill a gap in the literature by performing a novel analysis of dual-fuel operation with hydrogen, considering different substitution fractions, and using groundbreaking biofuels, such as HVO and farnesane. The results showed that in-cylinder pressure and temperature were increased with H₂ enrichment for every pilot fuel, but green diesel fuels presented lower values than those for diesel operation. Furthermore, hydrogen port injection slightly delayed the start of combustion and increased the ignition delay, but a reduction in both premixed and diffusion combustion duration was observed. Reductions in PM, CO, and CO₂ emissions were reported during H₂ addition for every pilot fuel, while increased NO_x was observed. Despite this increase, both HVO and farnesane decreased the emissions of this pollutant in single and dual-fuel operations, compared with fossil diesel. In addition, both renewable diesel fuels presented higher BTE than diesel for every studied H₂ mass flow.     

Biofuels in Spain: Market penetration analysis and competitiveness in the automotive fuel market

For several years the European Union (E.U.) has been promoting the use of biofuels due to their potential benefits such as the reduction of dependence on foreign energy imports (the raw materials can be produced within the E.U.), the more stable fossil fuel prices (they can replace fossil fuels on the market), the greenhouse gas (GHG) reduction (biofuels’ raw materials fix CO₂ from the atmosphere) and the fact that they can represent an additional source of income for the primary sector (biofuels’ raw materials are vegetables that can be grown and harvested).Despite the public aids (direct and indirect), biofuels are not competitive with fossil fuels at present, but it is possible that in the future the environment conditions change and biofuels might become competitive. It is difficult to assess whether this will happen or not, but it is possible to make an assessment of a future situation.This article presents two analyses with one objective: to determine if biofuels might become competitive in the future. The first analysis examines the dependencies of two quotations which have a strong relationship with fuels: the crude oil quotation and the CO₂ bond quotation. The analysis of these relationships may help to forecast the future competitiveness of biofuels. For instance, biofuels’ future competitiveness will be higher if their raw material costs are not related to crude oil quotations or if they are related in a negative way (the higher the crude oil quotations the lower the raw material biofuels’ cost). The second analysis focuses on the market penetration of biofuels in the Spanish market. There are data related to biofuels monthly consumption in Spain since 2007 and it is possible to know if biofuels are gaining market quota since then.     

Modeling HCCI combustion of biofuels: A review

The ever increasing energy demands coupled with the limited availability of fossil fuels and the detrimental environmental effects resulting from their use, has guided research toward seeking alternative fuels to gradually substitute conventional ones. Among these, biofuels have received increasing attention due to their attractive features of being renewable in nature and reducing the net CO₂ emissions. Biofuels have been used in conventional diesel and gasoline engines either as neat fuels or as supplements.Fortunately, a relatively new combustion concept for internal combustion engines, namely homogeneous charge compression ignition (HCCI) combustion, has been evolved in parallel to the biofuel research. HCCI combustion seems to be able to take advantage of the diverse properties of biofuels, since in this combustion mode ignition is not externally instigated, but relies on the compression and subsequent autoignition of a fuel-air mixture. This fact allows the utilization of different fuels or blends thereof, in order to regulate the ignition point and provide adequate operation under diverse operating conditions.This study provides an overview of existing simulation models for the simulation of biofueled HCCI combustion. Simulation models aid and supplement the experimental research conducted on HCCI combustion, providing a fundamental insight into the physicochemical parameters affecting performance and emissions formation. The simulation models include single-zone models, multi-zone models, probability based models, and multi-dimensional models in order of complexity. The vast majority of these models implement chemical kinetics to simulate the combustion process, not only due to the inherent dependence of HCCI combustion on the physicochemical properties of the fuel, but also due to the sometimes complex chemical structure of the biofuels, which include esters, ethers and alcohols. The reaction paths for these homologous series are quite different from the conventional hydrocarbons used to simulate conventional fuels, and provide the ground for current and future research work.     

CO2 benefit from the increasing percentage of diesel passenger cars in Sweden

Control of CO₂ emissions is a major environmental issue in most countries. The Swedish car market shows remarkably low new Diesel passenger car registrations compared to the average European Union car market. Therefore, a simple way to decrease CO₂ emissions from the transport sector in Sweden would be the replacement of gasoline by Diesel passenger cars, which emit less CO₂. The combined effects of probable changes in Diesel and gasoline future fuel consumption, new passenger car sales and market segmentation have been evaluated for different Diesel passenger cars penetrations. The results show a benefit in CO₂ emissions of about 2.8% with 30% Diesel penetration; if Diesel penetration reaches 50%, the benefit attains 7.5%. Future rises of CO₂ emissions caused by higher new passenger car registrations or unfavourable market segmentation could be at least partially counterbalanced by the introduction of more Diesel passenger cars. Copyright © 2006 John Wiley & Sons, Ltd.     

An integral evaluation of dieselisation policies for households’ cars

Reducing energy consumption and CO₂ emissions in the transport sector is a priority for Great Britain and other European countries as part of their agreements made in the Kyoto protocol and the Voluntary Agreement. To achieve these goals, it has been proposed to increase the market share of diesel vehicles which are more efficient than petrol ones. Based on partial approaches, previous research concluded that increasing the share of diesel vehicles will decrease CO₂ emissions (see 1 and 18; Zervas, 2006). Unlike these approaches, I use an integral approach based on discrete choice models to analyse diesel vehicle penetration in a broader context of transport in Great Britain. I provide for the first time, empirical evidence which is in line with Bonilla's (2009) argument that only improvements in vehicle efficiency will not be enough to achieve their goals of mitigation of energy consumption and CO₂ emissions. The model shows the technical limitations that the penetration of diesel vehicles faces and that a combination of improvements in public transportation and taxes on fuel prices is the most effective policy combination to reduce the total amount of energy consumption and CO₂ emissions among the analysed dieselisation polices.     

Implications of the EU Emissions Trading System for the South-East Europe Regional Electricity Market

As part of its climate policy, the European Union (EU) aims to reduce greenhouse gas (GHG) emissions levels by 20% by the year 2020 compared to 1990 levels. Although the EU is projected to reach this goal, its achievement of objectives under its Emissions Trading System (ETS) may be delayed by carbon leakage, which is defined as a situation in which the reduction in emissions in the ETS region is partially offset by an increase in carbon emissions in the non-ETS regions. We study the interaction between emissions and hydropower availability in order to estimate the magnitude of carbon leakage in the South-East Europe Regional Electricity Market (SEE-REM) via a bottom-up partial equilibrium framework. We find that 6.3% to 40.5% of the emissions reduction achieved in the ETS part of SEE-REM could be leaked to the non-ETS part depending on the price of allowances. Somewhat surprisingly, greater hydropower availability may increase emissions in the ETS part of SEE-REM. However, carbon leakage might be limited by demand response to higher electricity prices in the non-ETS area of SEE-REM. Such carbon leakage can affect both the competitiveness of producers in ETS member countries on the periphery of the ETS and the achievement of EU targets for CO₂ emissions reduction. Meanwhile, higher non-ETS electricity prices imply that the current policy can have undesirable outcomes for consumers in non-ETS countries, while non-ETS producers would experience an increase in their profits due to higher power prices as well as exports. The presence of carbon leakage in SEE-REM suggests that current EU policy might become more effective when it is expanded to cover more countries in the future.