Implementing CDM Limits in the EU ETS: A Law and Economics Approach

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The EU allows installations, subject to Emissions Trading, to use a limited volume of certified emissions reductions (CERs) generated through the Clean Development Mechanism (CDM) to cover their greenhouse gas emission. For the year 2008, the CER limits, which are differentiated by EU Member State potentially created substantial arbitrage rents, due to the CER-EUA spread in the range of 250 million Euro. This paper discusses different options for the allocation of this rent. The paper finds that according to economic theory making the right to use CERs tradable or the regulator pre-committing to buying CERs at the level of the limit reduces the inefficiencies connected to the current regulation. Auctioning these CER usage rights furthermore shifts the rents created through the CER-EUA spread to the state. The improved design and implementation of CDM limits justifies an intervention of the EU policy maker to correct previously competition distorting choices. Terms of use: Documents in

Monitoring Abatement in the Presence of an Import Quota on CERs

“…The result was quotas that ranged between 0% and 22%, where Estonia is the strictest and Germany the laxest country. This percentage of allocated emission allowances is admissible in the form of CERs (Vasa 2011). California considered an alternative restriction, a discount for abroad abatement certificates, but this paper will focus on an import quota.…”