Has the EU-ETS Financed the Energy Transition of the Italian Power System?

This paper focuses on the relationship between European Union Emission Trading System allowances’ prices and Italian electricity price, aiming at assessing whether such a mechanism has been driver for decarbonization of power sector. To this aim, we calculate long-run relationships energy prices, natural gas through VECM model, distinguishing peak off-peak prices. The analysis is carried out third phase EU-ETS, which started in 2013, two-year rolling windows that account changes over time pass-through rates. It shown price high rate roughly 70%, increasing time. On contrary, as low 7% wholesale being slightly more less respectively. However, substantially changing time, starting from level falling significantly, becoming negative recent years. could signal EU-ETS increasingly effective endogenizing emission costs producers, inducing them to reduce their production associated with emissions by means change technologies. impulse response functions hardly supports finding, eventually casting doubts effectiveness Italy drive transition toward carbon-intensive supply.