The Role of Price Predictions in Transforming Moral Markets: The Case of EU ETS and European Electricity Market

The paper proposes to conceptualize the role of price predictions in transforming moral markets. The analysis is based on the case study of the EU Emission Trading Scheme (ETS) which is a market-based policy instrument established to transform European economy into a low carbon one. The analysis shows that ETS is mainly devised to transform the European electricity market and to push fossil fuels out of electricity generation in Europe. Consequent reforms of the ETS had two main goals: to increase price of emission allowances (EUAs) and to increase price of electricity. The European Commission took care not to impact on the price of industrial goods, such as steel, cement, aluminum, etc., through the reform of the ETS. However, this did not exclude industry representatives from taking part in the negotiations of ETS reforms.

The paper examines debates around the 2008 ETS reform (within the Climate and Energy Package) and the 20013/2014 ETS reform (Backloading Mechanism) which revealed considerable challenges in communication and coordination of interests of actors who ranged from policy-makers, power sector, industry, trade unions representatives to activists. Actors had different interests in relation to the ETS and different visions of how ETS should work to be economically and environmentally efficient. The analysis shows that price predictions are important devices for communicating interests, objectives and visions of the ETS when its reforms are negotiated. Two types of price predictions were circulating in the debates: of emission allowances (EUAs) and of electricity. In the paper it is argued that price predictions played the role of imagined futures (Beckert 2013) as they represented the future state of ETS, other markets (electricity, but also industries) and relations between them. Price predictions as imagined futures legitimized and de-legitimized actors’ visions of the ETS and they served to moralize and de-moralize production of electricity in Europe.

The paper draws two types of conclusion. The first one refers to the role of price predictions in the creation of moral markets. Price predictions allow actors to communicate across difference and play a crucial role in legitimizing and de-legitimizing actors’ visions of a given market. They are crucial devises in the construction of the market’s morality, which is embedded in the materiality of particular goods (here electricity generated from particular fuels). The second conclusion points to the fact that the ETS is embedded in the European project of transforming the European electricity market into a moral market. Here, the materiality of price predictions is even more visible, since price predictions depend on the mix of fuels used to generate electricity and on the interconnectedness of national electricity markets in the EU. The status of national energy mixes and of electricity interconnectors becomes negotiated between morality and technicality.