scholarly journals An Endogenous Emissions Cap Produces a Green Paradox

2021 ◽  
Author(s):  
Reyer Gerlagh ◽  
Roweno J R K Heijmans ◽  
Knut Einar Rosendahl
Keyword(s):  
Emissions Trading ◽  
Price Rise ◽  
Eu Ets ◽  
Trading System ◽  
Quantitative Evidence ◽  
Green Paradox ◽  
Abatement Policies ◽  
Period Model ◽  
Emissions Trading System ◽  
The Eu

Abstract The European Union’s Emissions Trading System (EU ETS) is complemented by a Market Stability Reserve (MSR). After a major revision of the EU ETS in 2018, the MSR effectively makes the supply of allowances responsive to demand. In this paper, we show that a cap-and-trade scheme with an endogenous cap such as the EU ETS produces a Green Paradox. Abatement policies announced early but realized in the future are counter-effective because of the MSR: they increase cumulative emissions. We present the mechanisms in a two-period model, and then provide quantitative evidence of our result for an annual model disciplined on the price rise in the EU ETS that followed the introduction of the MSR. Our results point to the need for better coordination between different policies, such as the ‘European Green Deal’. We conclude with suggestions to improve the workings of an endogenous cap, ahead of the MSR review scheduled for 2021.

The EU Emissions Trading System in Crisis-Ridden Greece: Climate under Neoliberalism

2020 ◽  
pp. 048661342091054
Author(s):  
Andriana Vlachou ◽  
Georgios Pantelias
Keyword(s):  
Emissions Trading ◽  
Eu Ets ◽  
Low Carbon ◽  
The European Union ◽  
Trading System ◽  
Distributional Effects ◽  
Low Carbon Economy ◽  
Environmental Effectiveness ◽  
Emissions Trading System ◽  
The Eu

Neoliberal capitalism has extended the use of markets to address climate and energy issues. Carbon trading characteristically exemplifies the neoliberalization of climate policy. This paper discusses the workings of the European Union’s Emissions Trading System (EU ETS) in the European Union (EU) with a focus on its application in crisis-ridden Greece. Beyond environmental effectiveness and distributional effects, the paper explores the interactions of the EU ETS with crisis, austerity programs, energy poverty, and uneven development. Despite adjustments and changes, the EU ETS continues to indicate limited environmental effectiveness and unjust distributional effects. Moreover, by forging a centralized neoliberal transition to a low-carbon economy without consideration of the issues faced by unevenly developed and crisis-stricken EU members such as Greece, the EU ETS leads to additional disturbances and problems for the Greek economy as a whole, its pauperized working people, and its energy and climate options to reduce emissions on its own potential, needs, and priorities.

scholarly journals The EU ETS and its companion policies: any insight for China's ETS?

2021 ◽  
pp. 1-19
Author(s):  
Stefano F. Verde ◽  
Giulio Galdi ◽  
Isabella Alloisio ◽  
Simone Borghesi
Keyword(s):  
Emissions Trading ◽  
Eu Ets ◽  
Low Carbon ◽  
Trading System ◽  
Major Market ◽  
Ex Post ◽  
European Experience ◽  
Low Carbon Technologies ◽  
Emissions Trading System ◽  
The Eu

Abstract This paper analyses the role that companion policies have had in the reduction of emissions regulated by the EU Emissions Trading System (EU ETS) and the related policy interactions, with a view to identifying relevant insights for China's forthcoming Emissions Trading System (ETS). The investigation rests on: (a) the observation of the EU's and China's ETSs and policy mixes; (b) economic theory concerning companion policies and ETS design; and (c) empirical ex-post evidence from the EU ETS. Three main conclusions emerge from the analysis. First, China's ETS, while not imposing a fixed cap on emissions, will not be immune to waterbed effects of companion policies. Second, the European experience stresses the importance of making explicit the objectives pursued by companion policies, and of balancing policies for innovation and policies for adoption of low-carbon technologies. Third, in the presence of a major market surplus, only permanent adjustments to allowance supply can be effective in raising prices.

scholarly journals The European Union Emissions Trading System reduced CO2 emissions despite low prices

2020 ◽  
Vol 117 (16) ◽  
pp. 8804-8812 ◽  
Author(s):  
Patrick Bayer ◽  
Michaël Aklin
Keyword(s):  
European Union ◽  
Carbon Emissions ◽  
Emissions Trading ◽  
Carbon Markets ◽  
Eu Ets ◽  
The European Union ◽  
Trading System ◽  
Market Prices ◽  
Emissions Trading System ◽  
The Eu

International carbon markets are an appealing and increasingly popular tool to regulate carbon emissions. By putting a price on carbon, carbon markets reshape incentives faced by firms and reduce the value of emissions. How effective are carbon markets? Observers have tended to infer their effectiveness from market prices. The general belief is that a carbon market needs a high price in order to reduce emissions. As a result, many observers remain skeptical of initiatives such as the European Union Emissions Trading System (EU ETS), whose price remained low (compared to the social cost of carbon). In this paper, we assess whether the EU ETS reduced CO2 emissions despite low prices. We motivate our study by documenting that a carbon market can be effective if it is a credible institution that can plausibly become more stringent in the future. In such a case, firms might cut emissions even though market prices are low. In fact, low prices can be a signal that the demand for carbon permits weakens. Thus, low prices are compatible with successful carbon markets. To assess whether the EU ETS reduced carbon emissions even as permits were cheap, we estimate counterfactual carbon emissions using an original sectoral emissions dataset. We find that the EU ETS saved about 1.2 billion tons of CO2 between 2008 and 2016 (3.8%) relative to a world without carbon markets, or almost half of what EU governments promised to reduce under their Kyoto Protocol commitments. Emission reductions in sectors covered under the EU ETS were higher.

scholarly journals A European Emissions Trading System Powered by Distributed Ledger Technology: An Evaluation Framework

2021 ◽  
Vol 13 (4) ◽  
pp. 2106
Author(s):  
Rahel Mandaroux ◽  
Chuanwen Dong ◽  
Guodong Li
Keyword(s):  
Emissions Trading ◽  
Evaluation Framework ◽  
Eu Ets ◽  
The European Union ◽  
Trading System ◽  
Trading Systems ◽  
Distributed Ledger ◽  
Distributed Ledger Technology ◽  
Emissions Trading System ◽  
The Eu

The European Union Emissions Trading System (EU ETS) is a major pillar of the European energy policy to reduce greenhouse gas emissions. However, the reportedly pervasive frauds in this market are constraining the beneficial role of the EU ETS. In this conceptual paper, we propose to digitalize the EU ETS by distributed ledger technology (DLT), enabling the verification of authenticity and provenance, proof of ownership, and lifecycle traceability of carbon certificates and assets. Our platform allows verifiable credentials to validate emission allowances, real-time tracking of trading participants’ emissions, and the audit trail reporting of the decentralized trading records. Furthermore, we complement the DLT application concept with a structured interdisciplinary evaluation framework. Our framework and analysis aim to stimulate further interdisciplinary research in this area to support regulators, such as the European Commission, in designing effective digital emissions trading systems.

EU Law qua Global Governance Law? Deciphering Regulatory and Constitutional Competence Between EU Environmental Law and Global Governance

2012 ◽  
Vol 13 (11) ◽  
pp. 1147-1150
Author(s):  
Elaine Fahey ◽  
Ester Herlin-Karnell
Keyword(s):  
International Law ◽  
Global Governance ◽  
Emissions Trading ◽  
Eu Ets ◽  
Eu Law ◽  
Special Issue ◽  
Trading System ◽  
Starting Point ◽  
Emissions Trading System ◽  
The Eu

This special issue looks at the normative implications of EU global regulatory efforts in the area of environmental policy. The EU Environmental Emissions Trading System (EU-ETS) represents an example of successful application of EU environmental standards where global standards harmonization had failed. The intersection between EU law and global law, however, seems increasingly porous and difficult to decipher. Post-Lisbon, the EU increasingly functions like a State in its actions with the world. Nonetheless, the operation of international law internally within the EU legal order has been the subject of many distinctive constitutional periods, both prior to and after the Treaty of Lisbon. In the recent judgment of the Grand Chamber of the Court of Justice on the EU-Emissions Trading System, the Court rejected claims that the application of the EU-ETS scheme to the aviation sector, specifically US airlines, was unlawful under EU and international law. In the realm of the environment, EU environmental protection is both a value and normative aspiration. Yet what is a successful legal outcome of the adoption of ambitious and aggressive global legal regulatory frameworks in this domain? How should contemporary EU global policy and value ambitions be adjudicated in law? The case raises broader issues about the legitimacy of EU law and externalities arising from extended EU competences to positively promote EU constitutional values beyond Europe. While using this case as its starting point, this special issue sets out to look at the wider constitutional questions asked by it.

The Origin, Evolution and Consequences of the EU Emissions Trading System

2009 ◽  
Vol 9 (2) ◽  
pp. 101-122 ◽  
Author(s):  
Jon Birger Skjærseth ◽  
Jørgen Wettestad
Keyword(s):  
Emissions Trading ◽  
Eu Ets ◽  
Trading System ◽  
Eu Member States ◽  
International Climate ◽  
Policy Experiment ◽  
Eu Emissions Trading System ◽  
Emissions Trading System ◽  
The Eu ◽  
Broad Overview

The EU Emissions Trading System (EU ETS) is the cornerstone of EU climate policy, a grand policy experiment, as the first and largest international emissions trading system in the world. In this article, we seek to provide a broad overview of the initiation, decision-making and implementation of the EU ETS so far. We explore why the EU changed from a laggard to a leader in emissions trading, how it managed to establish the system rapidly, and the consequences to date, leading up to the 2008 proposal for a revised ET Directive for the post-2012 period. We apply three explanatory approaches, focusing on the roles of the EU member states, the EU institutions and the international climate regime, and conclude that all three approaches are needed to understand what happened, how and why. This also reveals that what happened in the early days of developing the system had significant consequences for the problems experienced in practice and the prospects ahead.

scholarly journals Price Relationships in the EU Emissions Trading System

2011 ◽  
pp. 212-220 ◽  
Author(s):  
Julien Chevallier
Keyword(s):  
European Union ◽  
Emissions Trading ◽  
Eu Ets ◽  
The European Union ◽  
Trading System ◽  
Trading Scheme ◽  
Price Relationships ◽  
Eu Emissions Trading System ◽  
Emissions Trading System ◽  
The Eu

The European Union Emissions Trading Scheme (EU ETS) constrains industrial polluters to buy/sell CO2 allowances depending on a regional depolluting objective of -8% of CO2 emissions by 2012 compared to 1990 levels. Companies may also buy carbon offsets from developing countries, funding emissions cuts there instead, under a Kyoto Protocol Clean Development Mechanism (CDM). This chapter critically analyzes the price relationships in the EU emissions trading system. The United Nations Framework Convention on Climate Change (UNFCCC) delivers credits that may be used by European companies for their compliance needs. Certified Emissions Reductions (CERs) from CDM projects are credits flowing into the global compliance market generated through emission reductions. EUAs (European Union Allowances) are the tradable unit under the EU ETS. Besides, the EU Linking Directive allows the import for compliance into the EU ETS up to 13.4% of CERs on average. This chapter details the idiosyncratic risks affecting each emissions market, be it in terms of regulatory uncertainty, economic activity, industrial structure, or the impact of other energy markets. Besides, based on a careful analysis of the EUA and CER price paths, this chapter assesses common risk factors by focusing more particularly on the role played by the CER import limit within the ETS.

Fixing the EU Emissions Trading System? Understanding the Post-2012 Changes

2010 ◽  
Vol 10 (4) ◽  
pp. 101-123 ◽  
Author(s):  
Jon Birger Skjærseth ◽  
Jørgen Wettestad
Keyword(s):  
Climate Policy ◽  
Emissions Trading ◽  
Eu Ets ◽  
Trading System ◽  
International Climate ◽  
Energy And Climate Policy ◽  
Eu Emissions Trading System ◽  
Emissions Trading System ◽  
The Eu ◽  
International Climate Negotiations

This article explains why the significant changes in the EU Emissions Trading System (EU ETS) for the 2013–2020 phase were adopted in 2008. The combination of a more stringent EU-wide cap, allocation of emission allowances for payment, and limits on imports of credits from third countries have strengthened the system for the post-2012 period. This will promote reduction in greenhouse gases compared to the old system. The main reasons for these changes are, first, changes in the positions of the member states due to unsatisfactory experience with performance of the EU ETS so far. Second, a “package approach” where the EU ETS reform was integrated into wider energy and climate policy facilitated agreement on the changes. Third, changes in the position of nonstate actors and a desire to affect the international climate negotiations contributed to the reform.

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