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Intra-union flexibility of non-ETS emission reduction obligations in the European Union


  • Tol, Richard S.J.


The EU proposal on greenhouse gas emission reduction has 28 targets for 2020: an EU-wide one for CO2 emissions covered by the European Trading System (ETS), and one target for non-ETS emissions per Member State. Implementation is more expensive than needed. I consider three alternative proposals to reduce costs. In the Irish proposal, Member States can purchase ETS permits to offset excess non-ETS emissions. In the Polish proposal, Member States can sell excess non-ETS emissions in the ETS. In the Swedish proposal, Member States can trade their non-ETS allocations. I compare these alternatives to the default policy (no flexibility outside the ETS) and the cost-effective solution (full flexibility). I calibrate a simple model to the results of the EU impact assessment, which did not disclose all details and made odd assumptions. The non-ETS allocation exceeds the projected emissions for three Member States. The alternative flexibility mechanisms would be used to only a limited extent, but would cut the costs of meeting the target. The Swedish and Polish proposals come closest to the cost-effective solution because of the hot air. The Irish proposal performs best if there are negative surprises in either abatement costs or emissions. The Swedish proposal will become policy.

Suggested Citation

  • Tol, Richard S.J., 2009. "Intra-union flexibility of non-ETS emission reduction obligations in the European Union," Energy Policy, Elsevier, vol. 37(5), pages 1745-1752, May.
  • Handle: RePEc:eee:enepol:v:37:y:2009:i:5:p:1745-1752

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    Cited by:

    1. Tol, Richard S.J., 2009. "Intra- and extra-union flexibility in meeting the European Union's emission reduction targets," Energy Policy, Elsevier, vol. 37(11), pages 4329-4336, November.
    2. De Cara, Stéphane & Jayet, Pierre-Alain, 2011. "Marginal abatement costs of greenhouse gas emissions from European agriculture, cost effectiveness, and the EU non-ETS burden sharing agreement," Ecological Economics, Elsevier, vol. 70(9), pages 1680-1690, July.
    3. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's GHG Emissions [Instrument choice: the pros and cons of alternative policy instruments]," Papers WP284, Economic and Social Research Institute (ESRI).
    4. Robaina Alves, Margarita & Rodríguez, Miguel & Roseta-Palma, Catarina, 2011. "Sectoral and regional impacts of the European carbon market in Portugal," Energy Policy, Elsevier, vol. 39(5), pages 2528-2541, May.
    5. Tol, Richard S.J., 2012. "A cost–benefit analysis of the EU 20/20/2020 package," Energy Policy, Elsevier, vol. 49(C), pages 288-295.
    6. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's Greenhouse Gas Emissions," Research Series, Economic and Social Research Institute (ESRI), number RS9.
    7. Harmsen, Robert & Eichhammer, Wolfgang & Wesselink, Bart, 2011. "Imbalance in Europe's Effort Sharing Decision: Scope for strengthening incentives for energy savings in the non-ETS sectors," Energy Policy, Elsevier, vol. 39(10), pages 6636-6649, October.
    8. Hermeling, Claudia & Löschel, Andreas & Mennel, Tim, 2013. "A new robustness analysis for climate policy evaluations: A CGE application for the EU 2020 targets," Energy Policy, Elsevier, vol. 55(C), pages 27-35.
    9. Ziemele, Jelena & Pakere, Ieva & Blumberga, Dagnija, 2016. "The future competitiveness of the non-Emissions Trading Scheme district heating systems in the Baltic States," Applied Energy, Elsevier, vol. 162(C), pages 1579-1585.
    10. Chiodi, Alessandro & Gargiulo, Maurizio & Deane, J.P. & Lavigne, Denis & Rout, Ullash K. & Ó Gallachóir, Brian P., 2013. "Modelling the impacts of challenging 2020 non-ETS GHG emissions reduction targets on Ireland′s energy system," Energy Policy, Elsevier, vol. 62(C), pages 1438-1452.
    11. Ziemele, Jelena & Gravelsins, Armands & Blumberga, Andra & Vigants, Girts & Blumberga, Dagnija, 2016. "System dynamics model analysis of pathway to 4th generation district heating in Latvia," Energy, Elsevier, vol. 110(C), pages 85-94.
    12. Conor Devitt & Richard Tol, 2012. "Oligopoly and Oligopsony Power in the Swedish Market," Working Paper Series 3212, Department of Economics, University of Sussex.

    More about this item


    Climate change Emissions trade European Union;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming


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