Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/hal/spmain/hal-03389323.html
   My bibliography  Save this paper

EU ETS-broken beyond repair ? An analysis based on FASTER principles

Author

Listed:
  • Xavier Timbeau

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Pawel Wiejski
Abstract
The EU ETS is one of the main European climate policies, covering 45 percent of EU's greenhouse gas emissions. Its main goal is to limit emissions cost-effectively, and to trigger innovations using a strong price signal, making low-carbon technologies more competitive. While emissions reduction targets for 2020 have already been achieved, the exact role of the ETS in this success remains controversial. The assessment is crucial, as more and more countries and regions plan to adopt similar policies to achieve their targets expressed in the Intended Nationally Determined Contributions, communicated at the Paris Conference of the Parties. The EU ETS, as the longest running and largest carbon market in the world, will undoubtedly serve as a point of reference. This paper attempts to provide a comprehensive analysis of the policy. First part outlines the historical development of emission trading systems, as well as the development of the EU ETS since its inception in 2005. Second part uses FASTER principles developed by the World Bank and the OECD to perform a multi-criteria, qualitative analysis of the EU ETS in its current form. Third part concentrates on the upcoming revision for the fourth phase, evaluating whether the proposals correctly address the policy's shortcomings. It also provides some alternative reform proposals.

Suggested Citation

  • Xavier Timbeau & Pawel Wiejski, 2017. "EU ETS-broken beyond repair ? An analysis based on FASTER principles," SciencePo Working papers Main hal-03389323, HAL.
    • Handle: RePEc:hal:spmain:hal-03389323
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03389323
    as

    Download full text from publisher

    File URL: https://hal-sciencespo.archives-ouvertes.fr/hal-03389323/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. de Perthuis, Christian & Trotignon, Raphael, 2014. "Governance of CO2 markets: Lessons from the EU ETS," Energy Policy, Elsevier, vol. 75(C), pages 100-106.
    2. Dominique Guegan & Marius-Cristian Frunza & Fabrice Thiebaut, 2011. "Missing trader fraud on the emissions market," PSE-Ecole d'économie de Paris (Postprint) halshs-00646205, HAL.
    3. Fritz W. Scharpf, 2006. "The Joint‐Decision Trap Revisited," Journal of Common Market Studies, Wiley Blackwell, vol. 44(4), pages 845-864, November.
    4. Barry Anderson & Corrado Di Maria, 2011. "Abatement and Allocation in the Pilot Phase of the EU ETS," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(1), pages 83-103, January.
    5. repec:dau:papers:123456789/13539 is not listed on IDEAS
    6. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    7. Lawrence H. Goulder, 2013. "Markets for Pollution Allowances: What Are the (New) Lessons?," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 87-102, Winter.
    8. Frank Convery, 2009. "Origins and Development of the EU ETS," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 391-412, July.
    9. repec:dau:papers:123456789/10174 is not listed on IDEAS
    10. Venmans, Frank, 2012. "A literature-based multi-criteria evaluation of the EU ETS," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(8), pages 5493-5510.
    11. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    12. Ellerman,A. Denny & Convery,Frank J. & de Perthuis,Christian With contributions by-Name:Alberola,Emilie With contributions by-Name:Buchner,Barbara K. With contributions by-Name:Delbosc,Anaïs, 2010. "Pricing Carbon," Cambridge Books, Cambridge University Press, number 9780521196475, October.
    13. Dominique Guegan & Marius-Cristian Frunza & Fabrice Thiebaut, 2011. "Missing trader fraud on the emissions market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00646205, HAL.
    14. World Bank & Ecofys & Vivid Economics, "undated". "State and Trends of Carbon Pricing 2016," World Bank Publications - Reports 25160, The World Bank Group.
    15. Bel, Germà & Joseph, Stephan, 2015. "Emission abatement: Untangling the impacts of the EU ETS and the economic crisis," Energy Economics, Elsevier, vol. 49(C), pages 531-539.
    16. Timothy Laing & Misato Sato & Michael Grubb & Claudia Comberti, 2014. "The effects and side‐effects of the EU emissions trading scheme," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 5(4), pages 509-519, July.
    17. Fell, Harrison, 2016. "Comparing policies to confront permit over-allocation," Journal of Environmental Economics and Management, Elsevier, vol. 80(C), pages 53-68.
    18. Perino, Grischa & Willner, Maximilian, 2016. "Procrastinating reform: The impact of the market stability reserve on the EU ETS," Journal of Environmental Economics and Management, Elsevier, vol. 80(C), pages 37-52.
    19. Mr. David Coady & Ian W.H. Parry & Louis Sears & Baoping Shang, 2015. "How Large Are Global Energy Subsidies?," IMF Working Papers 2015/105, International Monetary Fund.
    20. Johanna Arlinghaus, 2015. "Impacts of Carbon Prices on Indicators of Competitiveness: A Review of Empirical Findings," OECD Environment Working Papers 87, OECD Publishing.
    21. Koch, Nicolas & Fuss, Sabine & Grosjean, Godefroy & Edenhofer, Ottmar, 2014. "Causes of the EU ETS price drop: Recession, CDM, renewable policies or a bit of everything?—New evidence," Energy Policy, Elsevier, vol. 73(C), pages 676-685.
    22. repec:bla:jcmkts:v:44:y:2006:i::p:845-864 is not listed on IDEAS
    23. Dominique Guegan & Marius-Cristian Frunza & Fabrice Thiebaut, 2011. "Missing trader fraud on the emissions market," Post-Print halshs-00646205, HAL.
    24. Florens Flues & Alastair Thomas, 2015. "The distributional effects of energy taxes," OECD Taxation Working Papers 23, OECD Publishing.
    25. Jon Birger Skjærseth & Jørgen Wettestad, 2009. "The Origin, Evolution and Consequences of the EU Emissions Trading System," Global Environmental Politics, MIT Press, vol. 9(2), pages 101-122, May.
    26. Richstein, Jörn C. & Chappin, Émile J.L. & de Vries, Laurens J., 2015. "The market (in-)stability reserve for EU carbon emission trading: Why it might fail and how to improve it," Utilities Policy, Elsevier, vol. 35(C), pages 1-18.
    27. Clò, Stefano & Battles, Susan & Zoppoli, Pietro, 2013. "Policy options to improve the effectiveness of the EU emissions trading system: A multi-criteria analysis," Energy Policy, Elsevier, vol. 57(C), pages 477-490.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:spo:wpmain:info:hdl:2441/3rqefhgkm689ibvcj2hnil8dho is not listed on IDEAS
    2. repec:hal:spmain:info:hdl:2441/3rqefhgkm689ibvcj2hnil8dho is not listed on IDEAS
    3. Borghesi, Simone & Flori, Andrea, 2018. "EU ETS facets in the net: Structure and evolution of the EU ETS network," Energy Economics, Elsevier, vol. 75(C), pages 602-635.
    4. Quemin, Simon & Trotignon, Raphaël, 2021. "Emissions trading with rolling horizons," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    5. Richard G. Newell & William A. Pizer & Daniel Raimi, 2014. "Carbon Markets: Past, Present, and Future," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 191-215, October.
    6. Simon Quemin & Raphael Trotignon, 2018. "Competitive Permit Storage and Market Design: An Application to the EU-ETS," Working Papers 2018.19, FAERE - French Association of Environmental and Resource Economists.
    7. Flori, Andrea & Borghesi, Simone & Marin, Giovanni, 2024. "The environmental-financial performance nexus of EU ETS firms: A quantile regression approach," Energy Economics, Elsevier, vol. 131(C).
    8. Casini, Paolo & Valentini, Edilio, 2019. "Emissions Markets with Price Stabilizing Mechanisms: Possible Unpleasant Outcomes," ES: Economics for Sustainability 291801, Fondazione Eni Enrico Mattei (FEEM) > ES: Economics for Sustainability.
    9. Sato, Misato & Rafaty, Ryan & Calel, Raphael & Grubb, Michael, 2022. "Allocation, allocation, allocation! The political economy of the development of the European Union Emissions Trading System," LSE Research Online Documents on Economics 115431, London School of Economics and Political Science, LSE Library.
    10. Azarova, Valeriya & Mier, Mathias, 2021. "Market Stability Reserve under exogenous shock: The case of COVID-19 pandemic," Applied Energy, Elsevier, vol. 283(C).
    11. Marcin Rabe & Dalia Streimikiene & Yuriy Bilan, 2019. "EU Carbon Emissions Market Development and Its Impact on Penetration of Renewables in the Power Sector," Energies, MDPI, vol. 12(15), pages 1-20, August.
    12. Panagiotis Koromilas & Angeliki Mathioudaki & Sotirios Dimos & Dimitris Fotakis, 2023. "Modeling Intertemporal Trading of Emission Permits Under Market Power," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(1), pages 241-278, January.
    13. Karpf, Andreas & Mandel, Antoine & Battiston, Stefano, 2018. "Price and network dynamics in the European carbon market," Journal of Economic Behavior & Organization, Elsevier, vol. 153(C), pages 103-122.
    14. Bocklet, Johanna, 2020. "The Reformed EU ETS in Times of Economic Crises: the Case of the COVID-19 Pandemic," EWI Working Papers 2020-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    15. Sebastian Schaefer, 2018. "Decoupling the EU ETS from subsidized renewables and other demand side effects Lessons from the impact of the EU ETS on CO2 emissions in the German electricity sector," MAGKS Papers on Economics 201835, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    16. Bruninx, Kenneth & Ovaere, Marten & Delarue, Erik, 2020. "The long-term impact of the market stability reserve on the EU emission trading system," Energy Economics, Elsevier, vol. 89(C).
    17. Valeriya Azarova & Mathias Mier, 2020. "MSR under Exogenous Shock: The Case of Covid-19 Pandemic," ifo Working Paper Series 338, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    18. Federico Galán-Valdivieso & Elena Villar-Rubio & María-Dolores Huete-Morales, 2018. "The erratic behaviour of the EU ETS on the path towards consolidation and price stability," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 18(5), pages 689-706, October.
    19. Grischa Perino & Maximilian Willner, 2019. "Rushing the Impatient: Allowance Reserves and the Time Profile of Low-Carbon Investments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 845-863, October.
    20. Huang, Wenyang & Zhao, Jianyu & Wang, Xiaokang, 2024. "Model-driven multimodal LSTM-CNN for unbiased structural forecasting of European Union allowances open-high-low-close price," Energy Economics, Elsevier, vol. 132(C).
    21. Schleich, Joachim & Lehmann, Sascha & Cludius, Johanna & Abrell, Jan & Betz, Regina Annette & Pinkse, Jonatan, 2020. "Active or passive? Companies' use of the EU ETS," Working Papers "Sustainability and Innovation" S07/2020, Fraunhofer Institute for Systems and Innovation Research (ISI).
    22. Richard G. Newell & William A. Pizer & Daniel Raimi, 2013. "Carbon Markets 15 Years after Kyoto: Lessons Learned, New Challenges," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 123-146, Winter.

    More about this item

    Keywords

    Cap and trade; EU ETS; Market stability reserve; Carbon price;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:spmain:hal-03389323. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Contact - Sciences Po Departement of Economics (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.