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

  • Stephen Lecourt
  • Clement Palliere
  • Oliver Sartor

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.

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File URL: http://ns212578.ovh.net/RePEc/cec/wpaper/13-02-Cahier-R-2013-02-Lecourt-Palliere-Sartor.pdf
File Function: First version, 2013
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Paper provided by Chaire Economie du Climat in its series Working Papers with number 1302.

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Length: 24 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:cec:wpaper:1302
Contact details of provider: Web page: http://ns212578.ovh.net

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  1. 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.
  2. 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.
  3. Ralf Martin & Mirabelle Muuls & Laure B. de Preux & Ulrich J. Wagner, 2014. "Industry compensation under relocation risk: a firm-level analysis of the EU emissions trading scheme," LSE Research Online Documents on Economics 59312, London School of Economics and Political Science, LSE Library.
  4. De Perthuis, Christian & Convery, Frank J. & Ellerman, Denny, 2010. "Pricing carbon : the European Union Emissions Trading Scheme," Economics Papers from University Paris Dauphine 123456789/10174, Paris Dauphine University.
  5. Georg Zachmann & Anta Ndoye & Jan Abrell, 2011. "Assessing the impact of the EU ETS using firm level data," Working Papers 579, Bruegel.
  6. Ellerman,A. Denny & Convery,Frank J. & de Perthuis,Christian, 2010. "Pricing Carbon," Cambridge Books, Cambridge University Press, number 9780521196475.
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