{"id":444291,"date":"2026-03-27T15:10:38","date_gmt":"2026-03-27T14:10:38","guid":{"rendered":"https:\/\/www.wifo.ac.at\/publication\/444291\/"},"modified":"2026-03-27T15:10:39","modified_gmt":"2026-03-27T14:10:39","slug":"a-market-design-proposal-for-decoupling-carbon-and-electricity-prices","status":"publish","type":"publication","link":"https:\/\/www.wifo.ac.at\/en\/publication\/444291\/","title":{"rendered":"A Market Design Proposal for Decoupling Carbon and Electricity Prices"},"content":{"rendered":"","protected":false},"featured_media":0,"template":"","class_list":["post-444291","publication","type-publication","status-publish","hentry"],"acf":{"subtitle":"","text":"In European day-ahead electricity markets, carbon allowance costs passed through by marginal fossil plants raise consumer expenditure and generate inframarginal rents for non-emitting generators. We propose a settlement modification: when the zonal day-ahead price exceeds a threshold, non-emitting generation is remunerated at the clearing price minus a fixed CO2-proxy deduction, while all other units continue to receive the uniform price. The mechanism thus reallocates a part of the inframarginal rents to consumers. Using hourly data we estimate static average expenditure reductions of about 8.5 percent in Austria and 4.7 percent in Germany in 2025. We discuss bidding incentives around the threshold, interactions with Contracts for Difference, implementation in coupled bidding zones, and a gas-cost variant for the 2022 energy crisis.","onlinedate":"2026-03-27 14:10:40","lang":"English","publication_series":"","publication_date":"20260327","publication_date_year":"","publication_date_full":true,"publication_num_pages":"25","keywords":"[]","jelcodes":"[]","related_publications":"[]","pdf":444293,"zip":null,"link":"","monthly_report":true,"monthly_report_main":false,"monthly_report_volume":"","monthly_report_pages":"","monthly_report_pages_sort":"0","issue":"725","journal":"WIFO Working Papers","publisher":"","invisible":false,"external":false,"embargo_date":null,"types":[44410],"research_groups":[3655],"collaboration":"","persons":[434906,425699,423889],"persons_data":"[{\"personId\":434906,\"personName\":\"Simon Finster\",\"organisationNames\":[]},{\"personId\":425699,\"personName\":\"Bernhard Kasberger\",\"organisationNames\":[]},{\"personId\":423889,\"personName\":\"Simon R\u00fctten\",\"organisationNames\":[]}]","clients":[],"subclients":[],"partners":[],"topics":[],"host_publication_title":"","host_publication_subtitle":"","place_of_publication":"","host_publication_editors":"[]","type_description":"","output_media":"","chapter":"","article_number":"","citations":"{\"apa\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_apa rendering_contributiontoperiodical rendering_apa rendering_contributiontoperiodical_apa\\\"><span>Finster, S.<\\\/span><span>, Kasberger, B.<\\\/span><span>, &amp; R\u00fctten, S.<\\\/span> (2026). <span>A Market Design Proposal for Decoupling Carbon and Electricity Prices<\\\/span>. <span><em>WIFO Working Papers<\\\/em><\\\/span>, (725).<\\\/div>\",\"vancouver\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_vancouver rendering_contributiontoperiodical rendering_vancouver rendering_contributiontoperiodical_vancouver\\\"><span>Finster S<\\\/span><span>, Kasberger B<\\\/span><span>, R\u00fctten S<\\\/span>. <span class=\\\"title\\\"><span>A Market Design Proposal for Decoupling Carbon and Electricity Prices<\\\/span><\\\/span>. <span>WIFO Working Papers<\\\/span>. 2026 Mar 27;(725).<\\\/div>\",\"bibtex\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_bibtex rendering_contributiontoperiodical rendering_bibtex rendering_contributiontoperiodical_bibtex\\\"><div>@misc{fa51e5de7ded487dba80dda120978226,<\\\/div><div>  title    = \\\"A Market Design Proposal for Decoupling Carbon and Electricity Prices\\\",<\\\/div><div>  abstract = \\\"In European day-ahead electricity markets, carbon allowance costs passed through by marginal fossil plants raise consumer expenditure and generate inframarginal rents for non-emitting generators. We propose a settlement modification: when the zonal day-ahead price exceeds a threshold, non-emitting generation is remunerated at the clearing price minus a fixed CO2-proxy deduction, while all other units continue to receive the uniform price. The mechanism thus reallocates a part of the inframarginal rents to consumers. Using hourly data we estimate static average expenditure reductions of about 8.5 percent in Austria and 4.7 percent in Germany in 2025. We discuss bidding incentives around the threshold, interactions with Contracts for Difference, implementation in coupled bidding zones, and a gas-cost variant for the 2022 energy crisis.\\\",<\\\/div><div>  author   = \\\"Simon Finster and Bernhard Kasberger and Simon R{\\\\\\\"u}tten\\\",<\\\/div><div>  year     = \\\"2026\\\",<\\\/div><div>  month    = mar,<\\\/div><div>  day      = \\\"27\\\",<\\\/div><div>  language = \\\"English\\\",<\\\/div><div>  journal  = \\\"WIFO Working Papers\\\",<\\\/div><p>}<\\\/p><\\\/div>\",\"ris\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_ris rendering_contributiontoperiodical rendering_ris rendering_contributiontoperiodical_ris\\\"><p>TY  - GEN<\\\/p><p>T1  - A Market Design Proposal for Decoupling Carbon and Electricity Prices<\\\/p><p>AU  - Finster, Simon<\\\/p><p>AU  - Kasberger, Bernhard<\\\/p><p>AU  - R\u00fctten, Simon<\\\/p><p>PY  - 2026\\\/3\\\/27<\\\/p><p>Y1  - 2026\\\/3\\\/27<\\\/p><p>N2  - In European day-ahead electricity markets, carbon allowance costs passed through by marginal fossil plants raise consumer expenditure and generate inframarginal rents for non-emitting generators. We propose a settlement modification: when the zonal day-ahead price exceeds a threshold, non-emitting generation is remunerated at the clearing price minus a fixed CO2-proxy deduction, while all other units continue to receive the uniform price. The mechanism thus reallocates a part of the inframarginal rents to consumers. Using hourly data we estimate static average expenditure reductions of about 8.5 percent in Austria and 4.7 percent in Germany in 2025. We discuss bidding incentives around the threshold, interactions with Contracts for Difference, implementation in coupled bidding zones, and a gas-cost variant for the 2022 energy crisis.<\\\/p><p>AB  - In European day-ahead electricity markets, carbon allowance costs passed through by marginal fossil plants raise consumer expenditure and generate inframarginal rents for non-emitting generators. We propose a settlement modification: when the zonal day-ahead price exceeds a threshold, non-emitting generation is remunerated at the clearing price minus a fixed CO2-proxy deduction, while all other units continue to receive the uniform price. The mechanism thus reallocates a part of the inframarginal rents to consumers. Using hourly data we estimate static average expenditure reductions of about 8.5 percent in Austria and 4.7 percent in Germany in 2025. We discuss bidding incentives around the threshold, interactions with Contracts for Difference, implementation in coupled bidding zones, and a gas-cost variant for the 2022 energy crisis.<\\\/p><p>M3  - WIFO series<\\\/p><p>JO  - WIFO Working Papers<\\\/p><p>JF  - WIFO Working Papers<\\\/p><p>ER  - <\\\/p><\\\/div>\"}","scientific_assistance":"[]","scientific_review":"[]","version":"","release_date":null,"expiration_date":null,"surveyor":"","research_assistance":"","edv":"","additional_info_de":"","additional_info_en":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>A Market Design Proposal for Decoupling Carbon and Electricity Prices - WIFO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.wifo.ac.at\/en\/publication\/444291\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Market Design Proposal for Decoupling Carbon and Electricity Prices\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.wifo.ac.at\/en\/publication\/444291\/\" \/>\n<meta property=\"og:site_name\" content=\"WIFO\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/WIFOat\/\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-27T14:10:39+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.wifo.ac.at\/wp-content\/uploads\/2024\/05\/WIFO-Gebaeude-FotoAlexanderMueller-www.alexandermueller.at-IMG_6326-Bearbeitet-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1920\" \/>\n\t<meta property=\"og:image:height\" content=\"1280\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:site\" content=\"@WIFOat\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.wifo.ac.at\\\/en\\\/publication\\\/444291\\\/\",\"url\":\"https:\\\/\\\/www.wifo.ac.at\\\/en\\\/publication\\\/444291\\\/\",\"name\":\"A Market Design Proposal for Decoupling Carbon and Electricity Prices - 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