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EU ETS emissions under the cancellation mechanism: Effects of national measures

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  • Carlén, Björn

    (National Institute of Economic Research)

  • Dahlqvist, Anna

    (National Institute of Economic Research)

  • Mandell, Svante

    (National Institute of Economic Research)

  • Marklund, Pelle

    (National Institute of Economic Research)

Abstract

From 2023 onwards, allowances held in the market stability reserve above the number of allowances auctioned the previous year will be cancelled. In this paper, we analyse what consequences additional national emission reductions in the EU ETS sector will have on total emissions given this new cancellation mechanism. We show that additional national abatement measures now have the potential to reduce total EU ETS emissions. However, for this to happen, the emission reductions must take place early – before 2023 in our base case. To provide an understanding of this complex system, we present a series of extensions to show how the results are affected by, for example, future emission levels, technological development, optimising agents and speculative trading in allowances.

Suggested Citation

  • Carlén, Björn & Dahlqvist, Anna & Mandell, Svante & Marklund, Pelle, 2018. "EU ETS emissions under the cancellation mechanism: Effects of national measures," Working Papers 151, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0151
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    Cited by:

    1. Quemin, Simon & Trotignon, Raphaël, 2021. "Emissions trading with rolling horizons," Journal of Economic Dynamics and Control, Elsevier, vol. 125(C).
    2. Zhou, Xiaoxiao & Jia, Mengyu & Wang, Lu & Sharma, Gagan Deep & Zhao, Xin & Ma, Xiaowei, 2022. "Modelling and simulation of a four-group evolutionary game model for green innovation stakeholders: Contextual evidence in lens of sustainable development," Renewable Energy, Elsevier, vol. 197(C), pages 500-517.
    3. Osorio, Sebastian & Tietjen, Oliver & Pahle, Michael & Pietzcker, Robert C. & Edenhofer, Ottmar, 2021. "Reviewing the Market Stability Reserve in light of more ambitious EU ETS emission targets," Energy Policy, Elsevier, vol. 158(C).
    4. Anke, Carl-Philipp & Hobbie, Hannes & Schreiber, Steffi & Möst, Dominik, 2020. "Coal phase-outs and carbon prices: Interactions between EU emission trading and national carbon mitigation policies," Energy Policy, Elsevier, vol. 144(C).
    5. Bruninx, Kenneth & Ovaere, Marten & Delarue, Erik, 2020. "The long-term impact of the market stability reserve on the EU emission trading system," Energy Economics, Elsevier, vol. 89(C).
    6. Herweg, Fabian, 2020. "Overlapping efforts in the EU Emissions Trading System," Economics Letters, Elsevier, vol. 193(C).
    7. Sitarz, Joanna & Pahle, Michael & Osorio, Sebastian & Luderer, Gunnar & Pietzcker, Robert, 2023. "EU carbon prices signal high policy credibility and farsighted actors," EconStor Preprints 280455, ZBW - Leibniz Information Centre for Economics.
    8. Johanna Bocklet & Martin Hintermayer & Lukas Schmidt & Theresa Wildgrube, 2019. "The Reformed EU ETS - Intertemporal Emission Trading with Restricted Banking," EWI Working Papers 2019-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    9. Jiang, Ben & Du, Mingze & Wang, Dehui, 2024. "Carbon emissions trading, industrial structure upgrading and green development: Excess benefits of combined actions," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 480-501.
    10. Joanna Sitarz & Michael Pahle & Sebastian Osorio & Gunnar Luderer & Robert Pietzcker, 2024. "EU carbon prices signal high policy credibility and farsighted actors," Nature Energy, Nature, vol. 9(6), pages 691-702, June.
    11. Bersani, Alberto M. & Falbo, Paolo & Mastroeni, Loretta, 2022. "Is the ETS an effective environmental policy? Undesired interaction between energy-mix, fuel-switch and electricity prices," Energy Economics, Elsevier, vol. 110(C).
    12. Li, Changsheng & Qi, Yaping & Liu, Shaohui & Wang, Xu, 2022. "Do carbon ETS pilots improve cities' green total factor productivity? Evidence from a quasi-natural experiment in China," Energy Economics, Elsevier, vol. 108(C).
    13. Wanlin Yu & Jinlong Luo, 2022. "Impact on Carbon Intensity of Carbon Emission Trading—Evidence from a Pilot Program in 281 Cities in China," IJERPH, MDPI, vol. 19(19), pages 1-19, September.
    14. Quemin, Simon, 2022. "Raising climate ambition in emissions trading systems: The case of the EU ETS and the 2021 review," Resource and Energy Economics, Elsevier, vol. 68(C).
    15. Bocklet, Johanna & Hintermayer, Martin & Schmidt, Lukas & Wildgrube, Theresa, 2019. "The reformed EU ETS - Intertemporal emission trading with restricted banking," Energy Economics, Elsevier, vol. 84(C).
    16. Tietjen, Oliver & Lessmann, Kai & Pahle, Michael, 2021. "Hedging and temporal permit issuances in cap-and-trade programs: The Market Stability Reserve under risk aversion," Resource and Energy Economics, Elsevier, vol. 63(C).
    17. Johanna Bocklet, 2020. "The Reformed EU ETS in Times of Economic Crises: the Case of the COVID-19 Pandemic," EWI Working Papers 2020-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    18. Ulrik Beck & Peter K. Kruse-Andersen, 2020. "Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(4), pages 781-811, December.
    19. Azarova, Valeriya & Mier, Mathias, 2021. "Market Stability Reserve under exogenous shock: The case of COVID-19 pandemic," Applied Energy, Elsevier, vol. 283(C).
    20. Simon Quemin, 2020. "Using Supply-Side Policies to Raise Ambition: The Case of the EU ETS and the 2021 Review," Working Papers 2002, Chaire Economie du climat.

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