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EU ETS and the new green paradox

Author

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  • Knut Einar Rosendahl

Abstract

With the new rules of the EU ETS, involving cancellation of allowances, cumulative emissions are no longer fixed but depending on the market outcome. Perino (2018) showed that additional abatement effort can reduce cumulative emissions if it occurs within a few years. This article shows that Perino’s result will be reversed, i.e., cumulative emissions increase, if the abatement effort is at a later year, or permanent. Thus, a new green paradox has emerged.

Suggested Citation

  • Knut Einar Rosendahl, 2019. "EU ETS and the new green paradox," CESifo Working Paper Series 7645, CESifo.
    • Handle: RePEc:ces:ceswps:_7645
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    Cited by:

    1. Christoph Boehringer & Carolyn Fischer, 2020. "Kill Bill or Tax: An Analysis of Alternative CO2 Price Floor Optionsfor EU Member States," Working Papers V-432-20, University of Oldenburg, Department of Economics, revised Oct 2020.
    2. Bruninx, Kenneth & Ovaere, Marten & Gillingham, Kenneth & Delarue, Erik, 2019. "The unintended consequences of the EU ETS cancellation policy," MPRA Paper 96437, University Library of Munich, Germany.
    3. Azarova, Valeriya & Mier, Mathias, 2021. "Market Stability Reserve under exogenous shock: The case of COVID-19 pandemic," Applied Energy, Elsevier, vol. 283(C).
    4. Rickels, Wilfried & Peterson, Sonja & Felbermayr, Gabriel, 2019. "Schrittweise zu einem umfassenden europäischen Emissionshandel," Kiel Policy Briefs 127, Kiel Institute for the World Economy.
    5. Grischa Perino & Robert A. Ritz & Arthur van Benthem, 2019. "Overlapping Climate Policies," NBER Working Papers 25643, National Bureau of Economic Research, Inc.
    6. Lukas Schmidt, 2020. "Puncturing the Waterbed or the New Green Paradox? The Effectiveness of Overlapping Policies in the EU ETS under Perfect Foresight and Myopia," EWI Working Papers 2020-7, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    7. Valeriya Azarova & Mathias Mier, 2020. "MSR under Exogenous Shock: The Case of Covid-19 Pandemic," ifo Working Paper Series 338, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

    More about this item

    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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