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How neutral is the choice of the allocation mechanism in cap-and-trade schemes? Evidence from the EU-ETS

Author

Listed:
  • Nicola De Vivo

    (IMT Institute for Advanced Studies Lucca)

  • Giovanni Marin

    (Professore di Economia politica presso il Dipartimento di Economia, Società , Politica dell’Università di Urbino Carlo Bo)

Abstract

The European Emission Trading Scheme (EU ETS) is the central EU policy instrument aimed at mitigating climate change. According to Coase (1960), the level of emissions for each firm in an emission trading, in equilibrium, does not depend on the assignment of property rights over the emissions but this could not be the case in a real-world system, with a lot of possible frictions, as transaction costs and behavioural anomalies. This paper exploits the asymmetry in the allocation mechanisms introduced from the third phase of the EU ETS to evaluate whether different allocation mechanisms are neutral in terms of emission abatement decisions. Results suggest a non-neutral role of the allocation mechanisms.

Suggested Citation

  • Nicola De Vivo & Giovanni Marin, 2018. "How neutral is the choice of the allocation mechanism in cap-and-trade schemes? Evidence from the EU-ETS," Argomenti, University of Urbino Carlo Bo, Department of Economics, Society & Politics, vol. 9(9), pages 1-24, January-A.
    • Handle: RePEc:urb:journl:v:9:y:2018:p:1-24
    DOI: 10.14276/1971-8357.1062
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    Cited by:

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    More about this item

    Keywords

    EU ETS; grandfathering; auctioning; carbon leakage.;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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