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Governance of CO2 markets: lessons from the EU ETS

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  • Christian de Perthuis
  • Raphael Trotignon

Abstract

The European emissions trading scheme (EU ETS) is the centrepiece of Europe’s climate policy. The system has been undermined variously by the weakness of its regulation, an undesirable overlap with other public policies and the far-reaching economic and financial crisis that caused the market price of allowances to plunge. This article attempts to identify the conditions for making the coming years of the EU ETS a success. It draws historical lessons from the eight years the scheme has been in operation, and then analyzes, using the ZEPHYR-Flex model, the various interventions by the public authorities currently under discussion in order to revive the market. These simulations reveal the risk of carrying forward problems to the future, with further clouding of the visibility needed by ETS actors in the long term. Finally, the article proposes to draw lessons from monetary policy by outlining what might be the mandate of an Independent Carbon Market Authority, with responsibility for the dynamic management of the supply of allowances, and whose main mission would be to ensure the optimal linkage between the different temporal horizons of the climate strategy.

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File URL: http://cec-repec.site11.com/RePEc/cec/wpaper/13-09-Cahier-R-2013-07-De-Perthuis-Trotignon-EU-ETS-Governance.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by Chaire Economie du Climat in its series Working Papers with number 1307.

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Length: 30 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:cec:wpaper:1307

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Web page: http://cec-repec.site11.com/
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Keywords: Emission trading; EU ETS; governance;

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