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How to design Greenhouse Gas Trading in the EU?




Summary: A new and remarkable Green Paper about how to trade Greenhouse gases (GHG) in the EU has recently been published by the Commission of the European Union. This to achieve the stated 8% reduction target level. The Green Paper raises ten questions about how greenhouse gas permit trading should be designed in the EU before year 2005. These ten questions can be compressed into four main issues, namely target group, allocation of emission allowances, how to mix emission trading with other instruments and fourth enforcement. In the literature, there is a strong need to guide decision-makers and stimulate academic debates concerning the actual design of a simple and workable GHG market model for the EU. This model must take both economic, administrative and political concerns into account so that it is feasible in practice. Based on our findings, we therefore develop a policy recommendation concerning the future design of GHG permit trading in the EU.

Suggested Citation

  • Svendsen, Gert Tinggaard & Vesterdal, Morten, 2001. "How to design Greenhouse Gas Trading in the EU?," Working Papers 01-16, University of Aarhus, Aarhus School of Business, Department of Economics.
  • Handle: RePEc:hhs:aareco:2001_016

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    References listed on IDEAS

    1. Cramton, Peter & Kerr, Suzi, 2002. "Tradeable carbon permit auctions: How and why to auction not grandfather," Energy Policy, Elsevier, vol. 30(4), pages 333-345, March.
    2. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, March.
    3. Svendsen, Gert Tinggaard & Christensen, Jan Lien, 1999. "The US SO2 auction: analysis and generalization," Energy Economics, Elsevier, vol. 21(5), pages 403-416, October.
    4. Svendsen, Gert Tinggaard & Daugbjerg, Carsten & Hjollund, Lene & Pedersen, Anders Branth, 2001. "Consumers, industrialists and the political economy of green taxation: CO2 taxation in OECD," Energy Policy, Elsevier, vol. 29(6), pages 489-497, May.
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    Cited by:

    1. Amélie Charles & Olivier Darné & Jessica Fouilloux, 2010. "Testing the Martingale Difference Hypothesis in the EU ETS Markets for the CO2 Emission Allowances: Evidence from Phase I and Phase II," Working Papers hal-00473727, HAL.
    2. Deepa Menon Choudhary & Amit Garg & P.R Shukla, 2009. "Assessing Policy Choices For Managing SO2 Emisions From Indian Power Sector," Working Papers id:1957, eSocialSciences.
    3. Charles, Amélie & Darné, Olivier & Fouilloux, Jessica, 2011. "Testing the martingale difference hypothesis in CO2 emission allowances," Economic Modelling, Elsevier, vol. 28(1), pages 27-35.
    4. Rousse, Olivier, 2008. "Environmental and economic benefits resulting from citizens' participation in CO2 emissions trading: An efficient alternative solution to the voluntary compensation of CO2 emissions," Energy Policy, Elsevier, vol. 36(1), pages 388-397, January.
    5. Vesterdal, Morten & Svendsen, Gert Tinggaard, 2004. "How should greenhouse gas permits be allocated in the EU?," Energy Policy, Elsevier, vol. 32(8), pages 961-968, June.
    6. Markussen, Peter & Svendsen, Gert Tinggaard, 2005. "Industry lobbying and the political economy of GHG trade in the European Union," Energy Policy, Elsevier, vol. 33(2), pages 245-255, January.
    7. Hansson, Sven Ove & Edvardsson Björnberg, Karin & Vredin Johansson, Maria, 2011. "Making Climate Policy Efficient Implementing a Model for Environmental Policy Efficiency," Working Papers 125, National Institute of Economic Research.
    8. B. Sudhakara Reddy & Gaudenz B. Assenza, 2008. "The Great climate debate : A Developing country perspective," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-008, Indira Gandhi Institute of Development Research, Mumbai, India.
    9. Cong, Rong-Gang & Wei, Yi-Ming, 2012. "Experimental comparison of impact of auction format on carbon allowance market," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(6), pages 4148-4156.

    More about this item


    European Union; Energy policy; Greenhouse gases; CO2 emission; Permit trading design; Kyoto protocol; Electricity sector;

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy


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