IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v38y2010i5p2420-2430.html
   My bibliography  Save this article

Grandfathering, auctioning and Carbon Leakage: Assessing the inconsistencies of the new ETS Directive

Author

Listed:
  • Clò, Stefano

Abstract

The new ETS Directive defines three different allocation rules, granting exemption from auctioning to those sectors exposed to the risk of Carbon Leakage. This article analyses the inconsistencies that characterize this new allocation rule and it concludes that the methodology designed to assess the risk of Carbon Leakage is more politically driven than economically grounded. The results of the Carbon Leakage risk assessment reveal that grandfathering is going to be the dominant allocation rule during the third phase also. However, not only the exemption from auctioning is unlikely to mitigate Carbon Leakage, instead of improving the allocation transparency and granting harmonization of higher rules but also the new ETS allocation rule is likely to increase the distortions of competition, worsening rather than improving the harmonization within the ETS.

Suggested Citation

  • Clò, Stefano, 2010. "Grandfathering, auctioning and Carbon Leakage: Assessing the inconsistencies of the new ETS Directive," Energy Policy, Elsevier, vol. 38(5), pages 2420-2430, May.
    • Handle: RePEc:eee:enepol:v:38:y:2010:i:5:p:2420-2430
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301-4215(09)00991-4
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Karsten Neuhoff & Kim Keats Martinez & Misato Sato, 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 73-91, January.
    2. Stefan P. Schleicher & Claudia Kettner & Angela Köppl & Gregor Thenius, 2007. "Stringency and Distribution in the EU Emissions Trading Scheme –The 2005 Evidence," Working Papers 2007.22, Fondazione Eni Enrico Mattei.
    3. Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006. "CO 2 cost pass-through and windfall profits in the power sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
    4. Damien Demailly & Philippe Quirion, 2006. "CO 2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: grandfathering versus output-based allocation," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 93-113, January.
    5. Damien Demailly & Philippe Quirion, 2006. "CO 2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: grandfathering versus output-based allocation," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 93-113, January.
    6. Cameron Hepburn & Michael Grubb & Karsten Neuhoff & Felix Matthes & Maximilien Tse, 2006. "Auctioning of EU ETS phase II allowances: how and why?," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 137-160, January.
    7. Woerdman Edwin & Arcuri Alessandra & Clò Stefano, 2008. "Emissions Trading and the Polluter-Pays Principle: Do Polluters Pay under Grandfathering?," Review of Law & Economics, De Gruyter, vol. 4(2), pages 565-590, December.
    8. Angus Johnston, 2006. "Free allocation of allowances under the EU emissions trading scheme: legal issues," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 115-136, January.
    9. Damien Demailly & Philippe Quirion, 2006. "CO2 abatement, competitiveness and leakage in the European cement industry under the EU ETS: Grandfathering vs. output-based allocation," Post-Print halshs-00639327, HAL.
    10. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Zhong Xiang, 2012. "Competitiveness and Leakage Concerns and Border Carbon Adjustments," International Review of Environmental and Resource Economics, now publishers, vol. 6(3), pages 225-287, December.
    2. Döttling, Robin & Rola-Janicka, Magdalena, 2023. "Too levered for Pigou: carbon pricing, financial constraints, and leverage regulation," Working Paper Series 2812, European Central Bank.
    3. 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.
    4. Huiqin Jiang & Xinxiao Shao & Xiao Zhang & Jianqiang Bao, 2017. "A Study of the Allocation of Carbon Emission Permits among the Provinces of China Based on Fairness and Efficiency," Sustainability, MDPI, vol. 9(11), pages 1-17, November.
    5. Chang, Kai & Zhang, Chao & Chang, Hao, 2016. "Emissions reduction allocation and economic welfare estimation through interregional emissions trading in China: Evidence from efficiency and equity," Energy, Elsevier, vol. 113(C), pages 1125-1135.
    6. Simone Borghesi & Andrea Flori, 2016. "EU ETS Facets in the Net: How Account Types Influence the Structure of the System," Working Papers 2016.08, Fondazione Eni Enrico Mattei.
    7. Pasche, Markus, 2019. "Fridays for Future meets the Hotelling rule: some thoughts on decarbonization policies," MPRA Paper 94803, University Library of Munich, Germany.

    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. Misato Sato & Karsten Neuhoff & Verena Graichen & Katja Schumacher & Felix Matthes, 2013. "Sectors under scrutiny � Evaluation of indicators to assess the risk of carbon leakage in the UK and Germany," GRI Working Papers 113, Grantham Research Institute on Climate Change and the Environment.
    2. Jean-Philippe Nicolaï & Jorge Zamorano, 2018. "Windfall Profits Under Pollution Permits and Output-Based Allocation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(4), pages 661-691, April.
    3. 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.
    4. Demailly, Damien & Quirion, Philippe, 2008. "Changing the Allocation Rules in the EU ETS: Impact on Competitiveness and Economic Efficiency," Climate Change Modelling and Policy Working Papers 46623, Fondazione Eni Enrico Mattei (FEEM).
    5. Yu-Jie Hu & Lishan Yang & Fali Duan & Honglei Wang & Chengjiang Li, 2022. "A Scientometric Analysis and Review of the Emissions Trading System," Energies, MDPI, vol. 15(12), pages 1-20, June.
    6. Meunier, Guy & Ponssard, Jean-Pierre & Quirion, Philippe, 2014. "Carbon leakage and capacity-based allocations: Is the EU right?," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 262-279.
    7. Anger, Niels & Oberndorfer, Ulrich, 2008. "Firm performance and employment in the EU emissions trading scheme: An empirical assessment for Germany," Energy Policy, Elsevier, vol. 36(1), pages 12-22, January.
    8. Frédéric Branger & Jean-Pierre Ponssard & Oliver Sartor & Misato Sato, 2015. "EU ETS, Free Allocations, and Activity Level Thresholds: The Devil Lies in the Details," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 401-437.
    9. Frédéric Branger & Misato Sato, 2017. "Solving the clinker dilemma with hybrid output-based allocation," Climatic Change, Springer, vol. 140(3), pages 483-501, February.
    10. Jinye Zhao & Benjamin F. Hobbs & Jong-Shi Pang, 2010. "Long-Run Equilibrium Modeling of Emissions Allowance Allocation Systems in Electric Power Markets," Operations Research, INFORMS, vol. 58(3), pages 529-548, June.
    11. Zhang, Zhong Xiang, 2012. "Competitiveness and Leakage Concerns and Border Carbon Adjustments," International Review of Environmental and Resource Economics, now publishers, vol. 6(3), pages 225-287, December.
    12. Monjon, Stéphanie & Quirion, Philippe, 2011. "Addressing leakage in the EU ETS: Border adjustment or output-based allocation?," Ecological Economics, Elsevier, vol. 70(11), pages 1957-1971, September.
    13. Vera Zipperer & Misato Sato & Karsten Neuhoff, 2017. "Benchmarks for Emissions Trading – General Principles for Emissions Scope," Discussion Papers of DIW Berlin 1712, DIW Berlin, German Institute for Economic Research.
    14. Beat Hintermann & Maja Žarković & Corrado Di Maria & Ulrich J. Wagner, 2020. "The Effect of Climate Policy on Productivity and Cost Pass-Through in the German Manufacturing Sector," CRC TR 224 Discussion Paper Series crctr224_2020_249, University of Bonn and University of Mannheim, Germany.
    15. Demailly, Damien & Quirion, Philippe, 2008. "European Emission Trading Scheme and competitiveness: A case study on the iron and steel industry," Energy Economics, Elsevier, vol. 30(4), pages 2009-2027, July.
    16. Jos Sijm, 2012. "Tradable Carbon Allowances: The Experience of the European Union and Lessons Learned," Chapters, in: Chin Hee Hahn & Sang-Hyop Lee & Kyoung-Soo Yoon (ed.), Responding to Climate Change, chapter 3, Edward Elgar Publishing.
    17. Pablo del Río & Javier Carrillo-Hermosilla & Totti Könnölä & Carlos Suárez, 2008. "Challenges and opportunities of a post-Kyoto mitigation regime: a survey of the European electricity sector," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 13(8), pages 863-885, October.
    18. Angela Köppl & Gregor Thenius & Stefan Schleicher, 2008. "Impacts of the EU Emissions Trading Scheme: Insights from the First Trading Period with a Focus on Competitiveness Issues," WIFO Studies, WIFO, number 33963, April.
    19. 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.
    20. Zhou, P. & Wang, M., 2016. "Carbon dioxide emissions allocation: A review," Ecological Economics, Elsevier, vol. 125(C), pages 47-59.

    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:eee:enepol:v:38:y:2010:i:5:p:2420-2430. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    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.