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Generous allocation and a ban on banking — implications of a simulation game for EU emissions trading

In: Emissions Trading and Business

Author

Listed:
  • Joachim Schleich

    (Fraunhofer Institute for Systems and Innovation Research (ISI)
    Virginia Polytechnic Institute and State University)

  • Karl-Martin Ehrhart

    (University of Karlsruhe)

  • Christian Hoppe

    (University of Karlsruhe)

  • Stefan Seifert

    (University of Karlsruhe
    Takon GmbH)

Abstract

Admitting banking in emissions trading systems reduces overall compliance costs by allowing for intertemporal flexibility: cost savings can be traded over time. However most, EU Member States prohibit the transfer of unused allowances from the period of 2005–2007 into the first commitment period under the Kyoto Protocol, i.e. 2008–2012. At the same time, allowances appear to be allocated fairly generously to the emissions trading sector. In this paper, we first explore the implications of such a ban on banking when initial emission targets are lenient. This analysis is based on a simulation which was recently carried out in Germany with companies and with a student control group. The findings suggest that an EU-wide ban on banking would lead to efficiency losses in addition to those losses which arise from the lack of intertemporal flexibility.

Suggested Citation

  • Joachim Schleich & Karl-Martin Ehrhart & Christian Hoppe & Stefan Seifert, 2006. "Generous allocation and a ban on banking — implications of a simulation game for EU emissions trading," Springer Books, in: Ralf Antes & Bernd Hansjürgens & Peter Letmathe (ed.), Emissions Trading and Business, pages 27-38, Springer.
    • Handle: RePEc:spr:sprchp:978-3-7908-1748-5_3
    DOI: 10.1007/3-7908-1748-1_3
    as

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