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Abatement and Allocation in the Pilot Phase of the EU ETS

  • Corrado Di Maria

    (University College Dublin)

  • Barry Anderson

    (University College Dublin)

  • Frank Convery

    (University College Dublin)

We use historical industrial emissions data to assess the level of abatement and overallocation that took place across European countries during the pilot phase (2005-2007)of the European Union Emission Trading Scheme. Using a dynamic panel data model, we estimate the counterfactual (business-as-usual) emissions scenario for EU member states. Comparing this baseline to allocated and verified emissions, we conclude that both overallocation and abatement occurred, along with under-allocation and emissions inflation. Over the three trading years of the pilot phase we find over-allocation of approximately 376 million EUAs (6%) and total abatement at the member state level of 107 Mt CO2 (1.8%). However, due to over-allocation and possible uncertainty about future allocation methodologies, we calculate that emissions inflation of approximately 119 Mt CO2 (2%) occurred, resulting in emissions over the pilot phase being approximately 12 Mt CO2 (0.2%) higher than they would have been in the absence of the EU ETS.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2009.110.

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Date of creation: Dec 2009
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Handle: RePEc:fem:femwpa:2009.110
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