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

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  • 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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    References listed on IDEAS

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    Cited by:

    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. Bin Ye & Jingjing Jiang & Lixin Miao & Ji Li & Yang Peng, 2015. "Innovative Carbon Allowance Allocation Policy for the Shenzhen Emission Trading Scheme in China," Sustainability, MDPI, vol. 8(1), pages 1-23, December.
    3. Yanbin Li & Zhen Li & Min Wu & Feng Zhang & Gejirifu De, 2018. "Regional-Level Allocation of CO 2 Emission Permits in China: Evidence from the Boltzmann Distribution Method," Sustainability, MDPI, vol. 10(8), pages 1-16, July.
    4. 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.
    5. Misato Sato & Karsten Neuhoff & Verena Graichen & Katja Schumacher & Felix Matthes, 2015. "Sectors Under Scrutiny: Evaluation of Indicators to Assess the Risk of Carbon Leakage in the UK and Germany," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 99-124, January.

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    Keywords

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