EU ETS emissions under the cancellation mechanism - Effects of national measures

Carlén, Björn; Dahlqvist, Anna; Mandell, Svante; Marklund, Pelle

doi:10.1016/j.enpol.2019.02.060

Cited by 35 publications

(18 citation statements)

References 10 publications

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“…While the effect of a reduced emission cap through the introduction of the CM has been widely discussed (e.g. Carlen et al (2018) and Beck and Kruse-Andersen (2018)) the main price driver is the increase in the LRF. 16…”

Section: Decomposition Of Effects Of the Recent Eu Ets Amendments On Prices And Emissionsmentioning

confidence: 99%

The reformed EU ETS - Intertemporal emission trading with restricted banking

et al. 2019

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With the increase of the linear reduction factor (LRF), the implementation of the market stability reserve (MSR) and the introduction of the cancellation mechanism (CM), the EU ETS changed fundamentally. We develop a discrete time model of the intertemporal allowance market that accurately depicts these reforms assuming that prices develop with the Hotelling rule as long as the TNAC is non-empty. A sensitivity analysis ensures the robustness of the model results regarding its input parameters. The accurate modelling of the EU ETS allows for a decomposition of the effects of the individual amendments and the evaluation of the dynamic efficiency. The MSR shifts emissions to the future but is allowance preserving. The CM reduces the overall emission cap, increasing allowance prices in the long run, but does not significantly impact the emission and price path in the short run. The increased LRF leads with 9 billion cancelled allowances to a stronger reduction than the CM and is therefore the main price driver of the reform.

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Section: Decomposition Of Effects Of the Recent Eu Ets Amendments On Prices And Emissionsmentioning

confidence: 99%

The reformed EU ETS - Intertemporal emission trading with restricted banking

et al. 2019

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“…decreasing with the date when reductions occur (e.g. Perino, 2018;Beck & Kruse-Andersen, 2019;Carlén et al, 2019). With the rolling horizon, it is twice as small in size for early reductions but rather invariant with the date of the reduction.…”

Section: Introductionmentioning

confidence: 99%

Emissions trading with rolling horizons

Quemin

Trotignon

2021

Journal of Economic Dynamics and Control

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We build a model of competitive emissions trading under uncertainty with supply-side control. Firms can use rolling planning horizons to deal with uncertainty and can also exhibit bounded responsiveness to the control. We tailor the model to the EU ETS, calibrate it to 2008-2017 market developments and find that a rolling horizon is able to reconcile the banking dynamics with discount rates implied from futures' yield curves. We evaluate the 2018 market reform, decompose the impacts of its main features and quantify how they hinge on the firms' horizon and responsiveness. We highlight important implications for policy design and evaluation.

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“…Some simulations suggest that a reduction of demand for permits at time t by one ton causes the sum over time of dA τ to be negative (often in the interval [-0.9, -0.4]) but there are also those suggesting that the sum could be positive. The outcome depends critically on assumed parameter values; see, for example, Bocklet et al (2019), Bruninx et al (2019), Carlén et al (2019), Gerlagh, Heijmans, and Rosendahl (2019), Rosendahl (2019b), and Silbye and Sørensen (2019). However, the focus here is on the impact of the reform on how to undertake economic evaluations of projects/policies, not to contribute to the discussion of how the reform actually affects the path of emissions.…”

Section: Intertemporal Generalizationmentioning

confidence: 99%

The 2018 reform of EU ETS: consequences for project appraisal

Johansson

2020

Journal of Environmental Economics and Policy

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The European Union's Emissions Trading System used to be a cap-andtrade scheme with a fixed supply of permits. However, a recent reform of the system 'punctures the waterbed' by making the supply of permits endogenous. The current paper discusses how to handle permits in economic evaluations such as cost-benefit analysis. It derives general equilibrium rules for schemes with a fixed cap as well as schemes with an endogenous cap. The paper also derives a cost-benefit rule to use when an exogenous reduction in emissions causes an induced intertemporal change in the supply of permits, what is termed a (positive or negative) permit multiplier, under an endogenous cap. For example, an induced reduction in emissions is associated with climate-related benefits but comes at a cost as production is displaced when the number of available permits decreases. The permit multiplier implies that emissions within the EU ETS are valued differently from emissions occurring elsewhere even under an endogenous cap. A further novel result is that an endogenous cap could increase the social profitability of abatement efforts. By replacing purchases of permits, abatement could cause a reduction in the endogenous supply of permits and hence emissions.

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EU ETS emissions under the cancellation mechanism - Effects of national measures

Cited by 35 publications

References 10 publications

The reformed EU ETS - Intertemporal emission trading with restricted banking

The reformed EU ETS - Intertemporal emission trading with restricted banking

Emissions trading with rolling horizons

The 2018 reform of EU ETS: consequences for project appraisal

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