The EU Emission Trading Scheme. Insights from the First Trading Years with a Focus on Price Volatility
AbstractThe EU Emission Trading Scheme (EU ETS) is a key instrument in European climate policy. Evidence from the first trading period (2005-2007) and the first year of the Kyoto period 2008 dampened, however, ex-ante enthusiasm: because of substantial over-allocation of emissions allowances in the first trading period the overall emissions cap was not stringent which caused a sharp drop in carbon prices. In 2008 a more stringent cap but still high price volatility was observed. Based on experience from the first years of the EU ETS the design of the EU ETS will be changed for the post-Kyoto period (2013-2020) including an EU-wide cap and the use of auctioning as the main allocation principle. So far, no measures to control price volatility are envisaged. This issue however gains in importance in the political and economic debate as prices are an important signal for investment decisions. More or less stable price signals are essential for the environmental effectiveness of an emissions trading scheme. As evidence shows, this is not necessarily guaranteed by the market process. Based on an analysis of the first trading years the paper provides an argumentation for the implementation of price stabilisation measures in the post-Kyoto period.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by WIFO in its series WIFO Working Papers with number 368.
Length: 26 pages
Date of creation: 06 Apr 2010
Date of revision:
climate policy; emissions trading; EU Emission Trading Scheme;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-ENE-2010-04-17 (Energy Economics)
- NEP-ENV-2010-04-17 (Environmental Economics)
- NEP-EUR-2010-04-17 (Microeconomic European Issues)
- NEP-RES-2010-04-17 (Resource Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alberola, Emilie & Chevallier, Julien & Cheze, Benoi^t, 2008. "Price drivers and structural breaks in European carbon prices 2005-2007," Energy Policy, Elsevier, vol. 36(2), pages 787-797, February.
- Lehmann, Paul & Gawel, Erik, 2011.
"Why should support schemes for renewable electricity complement the EU emissions trading scheme?,"
UFZ Discussion Papers
5/2011, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
- Lehmann, Paul & Gawel, Erik, 2013. "Why should support schemes for renewable electricity complement the EU emissions trading scheme?," Energy Policy, Elsevier, vol. 52(C), pages 597-607.
- Claudia Kettner & Daniela Kletzan-Slamanig & Angela Köppl, 2011. "The EU Emission Trading Scheme. Allocation Patterns and Trading Flows," WIFO Working Papers 402, WIFO.
- Robaina Alves, Margarita & Rodríguez, Miguel & Roseta-Palma, Catarina, 2011.
"Sectoral and regional impacts of the European carbon market in Portugal,"
Elsevier, vol. 39(5), pages 2528-2541, May.
- Margarita Robaina Alves & Miguel Rodríguez & Catarina Roseta-Palma, 2010. "Sectoral and regional impacts of the European Carbon Market in Portugal," GEE Papers 0021, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Jul 2010.
- Claudia Kettner & Daniela Kletzan-Slamanig & Angela Köppl, 2013. "The EU Emission Trading Scheme. Sectoral Allocation Patterns and Factors Determining Emission Changes," WIFO Working Papers 444, WIFO.
- Simone Borghesi, 2011. "European Climate Policy: Critical Aspects," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, June.
- Claudia Kettner & Daniela Kletzan-Slamanig & Angela Köppl & Thomas Schinko & Andreas Türk, 2011. "ETCLIP – The Challenge of the European Carbon Market: Emission Trading, Carbon Leakage and Instruments to Stabilise the CO2 Price. Price Volatility in Carbon Markets: Why it Matters and How it Can b," WIFO Working Papers 409, WIFO.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz).
If references are entirely missing, you can add them using this form.