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Free allocations in EU ETS Phase 3: The impact of emissions-performance benchmarking for carbonintensive industry

Author

Listed:
  • Stephen Lecourt
  • Clement Palliere
  • Oliver Sartor

Abstract

From Phase 3 (2013-20) of the European Union Emissions Trading Scheme, carbon-intensive industrial emitters will receive free allocations based on harmonised, EU-wide benchmarks. This paper analyses the impacts of these new rules on allocations to key energy-intensive sectors across Europe. It explores an original dataset that combines recent data from the National Implementing Measures of 20 EU Member States with the Community Independent Transaction Log and other EU documents. The analysis reveals that free allocations to benchmarked sectors will be reduced significantly compared to Phase 2 (2008-12). This reduction should both increase public revenues from carbon auctions and has the potential to enhance the economic efficiency of the carbon market. The analysis also shows that changes in allocation vary mostly across installations within countries, raising the possibility that the carbon-cost competitiveness impacts may be more intense within rather than across countries. Lastly, the analysis finds evidence that the new benchmarking rules will, as intended, reward installations with better emissions performance and will improve harmonisation of free allocations in the EU ETS by reducing differences in allocation levels across countries with similar carbon intensities of production.

Suggested Citation

  • 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.
  • Handle: RePEc:cec:wpaper:1302
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    File URL: http://www.chaireeconomieduclimat.org/RePEc/cec/wpaper/13-02-Cahier-R-2013-02-Lecourt-Palliere-Sartor.pdf
    File Function: First version, 2013
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    References listed on IDEAS

    as
    1. Jan Abrell & Anta Ndoye Faye & Georg Zachmann, 2011. "Assessing the impact of the EU ETS using firm level data," Working Papers of BETA 2011-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. 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.
    3. Pahle, Michael & Fan, Lin & Schill, Wolf-Peter, 2011. "How emission certificate allocations distort fossil investments: The German example," Energy Policy, Elsevier, vol. 39(4), pages 1975-1987, April.
    4. repec:dau:papers:123456789/10174 is not listed on IDEAS
    5. 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.
    6. Ellerman,A. Denny & Convery,Frank J. & de Perthuis,Christian ,Anaïs, 2010. "Pricing Carbon," Cambridge Books, Cambridge University Press, number 9780521196475, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Xiong, Ling & Shen, Bo & Qi, Shaozhou & Price, Lynn & Ye, Bin, 2017. "The allowance mechanism of China’s carbon trading pilots: A comparative analysis with schemes in EU and California," Applied Energy, Elsevier, vol. 185(P2), pages 1849-1859.

    More about this item

    Keywords

    European Union Emissions Trading Scheme; CO2 allowance allocation; Emissions-performance benchmarking;

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