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Overlapping efforts in the EU Emissions Trading System

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  • Herweg, Fabian

Abstract

According to the Phase IV (2021–2030) rules of the EU ETS, the total amount of emission permits allocated to firms is not fixed but endogenous. This implies that a national climate policy that overlaps with the ETS can have an impact on total aggregate emissions. Roughly speaking, if firms increase their holdings of emission permits, the total amount of permits allocated is reduced. This paper analytically investigates how an overlapping national policy affects the aggregate bank of emission permits. If marginal abatement costs are not too convex, national climate policies increase banking and thus tend to reduce overall emissions.

Suggested Citation

  • Herweg, Fabian, 2020. "Overlapping efforts in the EU Emissions Trading System," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520302135
    DOI: 10.1016/j.econlet.2020.109323
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    Cited by:

    1. Massimo Beccarello & Giacomo Di Foggia, 2023. "Review and Perspectives of Key Decarbonization Drivers to 2030," Energies, MDPI, vol. 16(3), pages 1-13, January.
    2. Schmidt, Lukas, 2020. "Puncturing the Waterbed or the New Green Paradox? The Effectiveness of Overlapping Policies in the EU ETS under Perfect Foresight and Myopia," EWI Working Papers 2020-7, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    3. Li, Changsheng & Qi, Yaping & Liu, Shaohui & Wang, Xu, 2022. "Do carbon ETS pilots improve cities' green total factor productivity? Evidence from a quasi-natural experiment in China," Energy Economics, Elsevier, vol. 108(C).
    4. Qianqian Guo & Zhifang Su & Chaoshin Chiao, 2022. "Carbon emissions trading policy, carbon finance, and carbon emissions reduction: evidence from a quasi-natural experiment in China," Economic Change and Restructuring, Springer, vol. 55(3), pages 1445-1480, August.
    5. Bocklet, Johanna, 2020. "The Reformed EU ETS in Times of Economic Crises: the Case of the COVID-19 Pandemic," EWI Working Papers 2020-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

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    More about this item

    Keywords

    Banking of permits; Cap-and-trade; EU ETS; National measures;
    All these keywords.

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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