IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v78y2019icp508-524.html
   My bibliography  Save this article

Installation entries and exits in the EU ETS: patterns and the delay effect of closure provisions

Author

Listed:
  • Verde, Stefano F.
  • Graf, Christoph
  • Jong, Thijs

Abstract

This paper analyses installation entries and exits in the EU ETS, over 2005–2013. Patterns of entries and exits are identified across countries, sectors, and time. The limitations of the EUTL as a data source for research purposes mean that only genuine exits (reflecting production capacity reduction), and not genuine entries (reflecting production capacity increases), can be systematically identified. Exits are found to be relatively frequent events, more so in manufacturing sectors with small average installation size. Moreover, exits were concentrated in 2007 and in 2012, the final years of Phase I and Phase II. We investigate whether the perverse incentives of closure provisions, in free allocation, explain such time pattern. A discrete-time hazard model for the exit event is estimated using a three-tier dataset combining installation-, firm-, and macro-level information. The results indicate that, most likely, closure provisions delayed installation exits, especially in Phase II.

Suggested Citation

  • Verde, Stefano F. & Graf, Christoph & Jong, Thijs, 2019. "Installation entries and exits in the EU ETS: patterns and the delay effect of closure provisions," Energy Economics, Elsevier, vol. 78(C), pages 508-524.
    • Handle: RePEc:eee:eneeco:v:78:y:2019:i:c:p:508-524
    DOI: 10.1016/j.eneco.2018.11.032
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S014098831830478X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2018.11.032?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ralf Martin & Mirabelle Mu?ls & Laure B. de Preux & Ulrich J. Wagner, 2014. "Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," American Economic Review, American Economic Association, vol. 104(8), pages 2482-2508, August.
    2. Giovanni Marin & Marianna Marino & Claudia Pellegrin, 2018. "The impact of the European Union Emission Trading Scheme on Multiple Measures of Economic Performance," Post-Print hal-01768870, HAL.
    3. A. Denny Ellerman, 2008. "New Entrant and Closure Provisions: How do they Distort?," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 63-76.
    4. Regina Betz & Karoline Rogge & Joachim Schleich, 2006. "EU emissions trading: an early analysis of national allocation plans for 2008-2012," Climate Policy, Taylor & Francis Journals, vol. 6(4), pages 361-394, July.
    5. Giovanni Marin & Marianna Marino & Claudia Pellegrin, 2018. "The Impact of the European Emission Trading Scheme on Multiple Measures of Economic Performance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(2), pages 551-582, October.
    6. Frédéric Branger & Jean-Pierre Ponssard & Oliver Sartor & Misato Sato, 2015. "EU ETS, Free Allocations, and Activity Level Thresholds: The Devil Lies in the Details," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 401-437.
    7. Karsten Neuhoff & Kim Keats Martinez & Misato Sato, 2006. "Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 73-91, January.
    8. 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.
    9. Szmaragd, Camille & Clarke, Paul & Steele, Fiona, 2013. "Subject specific and population average models for binary longitudinal data: a tutorial," LSE Research Online Documents on Economics 52199, London School of Economics and Political Science, LSE Library.
    10. Evangelina Dardati, 2016. "Pollution Permit Systems And Firm Dynamics: How Does The Allocation Scheme Matter?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 305-328, February.
    11. Lutz, Benjamin Johannes, 2016. "Emissions trading and productivity: Firm-level evidence from German manufacturing," ZEW Discussion Papers 16-067, ZEW - Leibniz Centre for European Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vieira, Leticia Canal & Longo, Mariolina & Mura, Matteo, 2021. "Are the European manufacturing and energy sectors on track for achieving net-zero emissions in 2050? An empirical analysis," Energy Policy, Elsevier, vol. 156(C).
    2. Piotr Gretszel & Henryk Gurgul & £ukasz Lach & Stefan Schleicher, 2020. "Testing for the economic and environmental impacts of EU Emissions Trading System: A panel GMM approach," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 21(2), pages 99-125.
    3. Ferrara, Antonella Rita & Giua, Ludovica, 2022. "Indirect cost compensation under the EU ETS: A firm-level analysis," Energy Policy, Elsevier, vol. 165(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Teixidó, Jordi & Verde, Stefano F. & Nicolli, Francesco, 2019. "The impact of the EU Emissions Trading System on low-carbon technological change: The empirical evidence," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    2. Beat Hintermann & Maja Žarković & Corrado Di Maria & Ulrich J. Wagner, 2020. "The Effect of Climate Policy on Productivity and Cost Pass-Through in the German Manufacturing Sector," CRC TR 224 Discussion Paper Series crctr224_2020_249, University of Bonn and University of Mannheim, Germany.
    3. Schleich, Joachim & Rogge, Karoline S. & Betz, Regina, 2008. "Incentives for energy efficiency in the EU Emissions Trading Scheme," Working Papers "Sustainability and Innovation" S2/2008, Fraunhofer Institute for Systems and Innovation Research (ISI).
    4. Rogge, Karoline S. & Schneider, Malte & Hoffmann, Volker H., 2011. "The innovation impact of the EU Emission Trading System -- Findings of company case studies in the German power sector," Ecological Economics, Elsevier, vol. 70(3), pages 513-523, January.
    5. Karoline S. Rogge & Christian Linden, 2010. "Cross-Country Comparison of the Incentives of the EU Emission Trading Scheme for Replacing Existing Power Plants in 2008–12," Energy & Environment, , vol. 21(7), pages 757-783, November.
    6. Rogge, Karoline S. & Linden, Christian, 2010. "Cross-country comparison of the replacement incentives of the EU ETS in 2008-12: the case of the power sector," Working Papers "Sustainability and Innovation" S1/2010, Fraunhofer Institute for Systems and Innovation Research (ISI).
    7. Rogge, Karoline S. & Schneider, Malte & Hoffmann, Volker H., 2010. "The innovation impact of EU emission trading: findings of company case studies in the German power sector," Working Papers "Sustainability and Innovation" S2/2010, Fraunhofer Institute for Systems and Innovation Research (ISI).
    8. Jonathan Colmer & Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner, 2020. "Does pricing carbon mitigate climate change? Firm-level evidence from the European Union emissions trading scheme," CEP Discussion Papers dp1728, Centre for Economic Performance, LSE.
    9. Meunier, Guy & Ponssard, Jean-Pierre & Quirion, Philippe, 2014. "Carbon leakage and capacity-based allocations: Is the EU right?," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 262-279.
    10. Stephen Lecourt & Clément Pallière & Oliver J. Sartor, 2013. "The impact of emissions-performance benchmarking on free allocations in EU ETS Phase 3," Working Papers hal-00809096, HAL.
    11. Themann, Michael & Koch, Nicolas, 2021. "Catching up and falling behind: Cross-country evidence on the impact of the EU ETS on firm productivity," Ruhr Economic Papers 904, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    12. Woerdman Edwin & Nentjes Andries, 2019. "Emissions Trading Hybrids: The Case of the EU ETS," Review of Law & Economics, De Gruyter, vol. 15(1), pages 1-32, March.
    13. D’Arcangelo, Filippo Maria & Pavan, Giulia & Calligaris, Sara, 2022. "The Impact of the European Carbon Market on Firm Productivity: Evidence from Italian Manufacturing Firms," FEEM Working Papers 324170, Fondazione Eni Enrico Mattei (FEEM).
    14. Filippo Maria D’Arcangelo & Giulia Pavan & Sara Calligaris, 2022. "The Impact of the European Carbon Market on Firm Productivity: Evidence from Italian Manufacturing Firms," Working Papers 2022.24, Fondazione Eni Enrico Mattei.
    15. Dechezleprêtre, Antoine & Nachtigall, Daniel & Venmans, Frank, 2023. "The joint impact of the European Union emissions trading system on carbon emissions and economic performance," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    16. Stephen Lecourt & Clement Palliere & Oliver Sartor, 2013. "Free allocations in EU ETS Phase 3: The impact of emissions-performance benchmarking for carbonintensive industry," Working Papers 1302, Chaire Economie du climat.
    17. Saussay, Aurélien & Zugravu-Soilita, Natalia, 2023. "International production chains and the pollution offshoring hypothesis: An empirical investigation," Resource and Energy Economics, Elsevier, vol. 73(C).
    18. Marit Klemetsen & Knut Einar Rosendahl & Anja Lund Jakobsen, 2020. "The Impacts Of The Eu Ets On Norwegian Plants’ Environmental And Economic Performance," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-32, February.
    19. Pahle, Michael & Fan, Lin & Schill, Wolf-Peter, 2011. "How Emission Certificate Allocations Distort Fossil Investments: The German Example," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 39(4), pages 1975-1987.
    20. Marin, Giovanni & Vona, Francesco, 2021. "The impact of energy prices on socioeconomic and environmental performance: Evidence from French manufacturing establishments, 1997–2015," European Economic Review, Elsevier, vol. 135(C).

    More about this item

    Keywords

    EU ETS; Entries and exits; Free allocation; Closure provisions; Delay effect; Hazard model;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:78:y:2019:i:c:p:508-524. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.