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Governance of CO2 markets: lessons from the EU ETS

Listed author(s):
  • Christian de Perthuis
  • Raphael Trotignon

The European emissions trading scheme (EU ETS) is the centrepiece of Europe’s climate policy. The system has been undermined variously by the weakness of its regulation, an undesirable overlap with other public policies and the far-reaching economic and financial crisis that caused the market price of allowances to plunge. This article attempts to identify the conditions for making the coming years of the EU ETS a success. It draws historical lessons from the eight years the scheme has been in operation, and then analyzes, using the ZEPHYR-Flex model, the various interventions by the public authorities currently under discussion in order to revive the market. These simulations reveal the risk of carrying forward problems to the future, with further clouding of the visibility needed by ETS actors in the long term. Finally, the article proposes to draw lessons from monetary policy by outlining what might be the mandate of an Independent Carbon Market Authority, with responsibility for the dynamic management of the supply of allowances, and whose main mission would be to ensure the optimal linkage between the different temporal horizons of the climate strategy.

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File URL: http://ns212578.ovh.net/RePEc/cec/wpaper/13-09-Cahier-R-2013-07-De-Perthuis-Trotignon-EU-ETS-Governance.pdf
File Function: First version, 2013
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Paper provided by Chaire Economie du Climat in its series Working Papers with number 1307.

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Length: 30 pages
Date of creation: 2013
Handle: RePEc:cec:wpaper:1307
Contact details of provider: Web page: http://ns212578.ovh.net

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  1. Stavins, Robert Norman & Schmalensee, Richard, 2012. "The SO2 Allowance Trading System: The Ironic History of a Grand Policy Experiment," Scholarly Articles 9368024, Harvard Kennedy School of Government.
  2. Brian C. Murray & Richard G. Newell & William A. Pizer, 2009. "Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 84-103, Winter.
  3. Raphael Trotignon, 2012. "Combining cap-and-trade with offsets: lessons from the EU-ETS," Climate Policy, Taylor & Francis Journals, vol. 12(3), pages 273-287, May.
  4. repec:dau:papers:123456789/11687 is not listed on IDEAS
  5. Samuel Fankhauser & Cameron Hepburn & Jisung Park, 2010. "Combining Multiple Climate Policy Instruments: How Not To Do It," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 209-225.
  6. repec:dau:papers:123456789/10174 is not listed on IDEAS
  7. Tatsutani, Marika & Pizer, William A., 2008. "Managing Costs in a U.S. Greenhouse Gas Trading Program: A Workshop Summary," Discussion Papers dp-08-23, Resources For the Future.
  8. Park, Hojeong & Hong, Won Kyung, 2014. "Korea׳s emission trading scheme and policy design issues to achieve market-efficiency and abatement targets," Energy Policy, Elsevier, vol. 75(C), pages 73-83.
  9. Lawrence H. Goulder, 2013. "Markets for Pollution Allowances: What Are the (New) Lessons?," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 87-102, Winter.
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