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The impact of emissions-performance benchmarking on free allocations in EU ETS Phase 3

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  • Stephen Lecourt
  • Clément Pallière
  • Oliver Sartor

Abstract

From Phase 3 (2013-20) of the European Union Emissions Trading Scheme carbon-intensive industrial emitters will receive free allocations based on harmonised, EU-wide benchmarks. This paper analyses and evaluates the impacts of these new rules on allocations to key energy-intensive sectors. It exploits an original dataset that combines recent data from the National Implementing Measures of 20 Member States with the Community Independent Transaction Log and ETS-installation NACE code data. The analysis reveals that free allocations to benchmarked sectors will be reduced significantly, though not excessively, in Phase 3. This reduction should both increase public revenues from carbon auctions and has the potential to enhance the economic efficiency of the carbon market. The analysis also shows that changes in allocation vary mostly across installations within, rather than across, countries. Lastly, the analysis finds evidence that the new rules will, as intended, reward installations with better emissions performance, and will improve harmonisation of free allocations in the EU ETS by reducing differences in allocation levels across countries with similar carbon intensities of production.

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File URL: http://cadmus.eui.eu/bitstream/handle/1814/26334/RSCAS_2013_17.pdf?sequence=1
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File URL: http://hdl.handle.net/1814/26334
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Bibliographic Info

Paper provided by European University Institute in its series RSCAS Working Papers with number 2013/17.

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Date of creation: Mar 2013
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Handle: RePEc:rsc:rsceui:2013/17

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Keywords: European Union Emissions Trading Scheme (EU ETS); CO2 allowance allocation; Emissions-performance benchmarking;

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  1. Georg Zachmann & Anta Ndoye & Jan Abrell, 2011. "Assessing the impact of the EU ETS using firm level data," Working Papers 579, Bruegel.
  2. Ellerman,A. Denny & Convery,Frank J. & de Perthuis,Christian With contributions by-Name:Alberola,Emilie With contributions by-Name:Buchner,Barbara K. With contributions by-Name:Delbosc,Anaïs, 2010. "Pricing Carbon," Cambridge Books, Cambridge University Press, number 9780521196475, October.
  3. Pahle, Michael & Fan, Lin & Schill, Wolf-Peter, 2011. "How emission certificate allocations distort fossil investments: The German example," Energy Policy, Elsevier, vol. 39(4), pages 1975-1987, April.
  4. De Perthuis, Christian & Convery, Frank J. & Ellerman, Denny, 2010. "Pricing carbon : the European Union Emissions Trading Scheme," Economics Papers from University Paris Dauphine 123456789/10174, Paris Dauphine University.
  5. Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner & Laure B. de Preux, 2012. "Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," CEP Discussion Papers dp1150, Centre for Economic Performance, LSE.
  6. Ahman, Markus & Burtraw, Dallas & Kruger, Joseph & Zetterberg, Lars, 2007. "A Ten-Year Rule to guide the allocation of EU emission allowances," Energy Policy, Elsevier, vol. 35(3), pages 1718-1730, March.
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