Environmental Finance: A Roadmap beyond the Dirty Dark Spread
Do you know what a dirty dark spread is? To work it out you take the price of wholesale electricity, and you subtract from that the price of coal multiplied by an efficiency factor. What you’re left with is an indication of the profitability of a coal-fired power station. And we call that the dirty dark spread. HOW DO YOU LIKE YOUR DARK SPREADS? But why ‘dirty’? We call it dirty because there’s a clean version of the dark spread, called the Clean Dark Spread. It's basically the same as the dirty one, except it adds the price of carbon dioxide to the equation. What you’re left with is an indication of the profitability of a coal-fired power station within a system that explicitly puts a price on carbon. It's lower, but the key question is 'how much lower?' The only reason we can make these distinctions is due to the existence of the carbon markets , brought into the fold through the Kyoto Protocol and the European Emissions Trading Scheme, perhaps the world’s most contro...