Europe 2020: an Alternative Proposal
The European Union has unilaterally decided to implement a cap & trade scheme to contain greenhouse gases (GHGs) emissions, starting on 1 January 2005. After the First Phase of the Scheme had been concluded on 31 December 2007, emissions from the sectors covered by the European Emissions Trading Scheme (ETS) had actually increased. That is not enough to tell that the scheme didn’t work: there are too little data to perform a credible assessment. The literature on the issue is not unanimous. It seems plausible, however, that some permits over-allocation occurred in 2005, that might explain the not-so-exciting performance of the scheme. In fact, to some extent some overallocation was also acknowledged by the European Commission itself, which adopted more stringent criteria for the Second Phase of ETS (2008-2012). Now the criteria and the rules for the Third Phase (2013-2020) are being debated, with an emphasis over defining even more stringent criteria and a shift from a grandfatherin system in the initial allocation (whereby allowances are initially given free-of-charge on the basis of historical track records for emissions), towards a partial auctioning system (whereby permits are initially given to the highest bidders), with a goal of a full auctioning in 2027. At the same time, safeguard measures are being considered in order to prevent “carbon leakage” (i.e. delocalization due to higher costs of energy) in the energy-intensive economic sectors or sub-sectors that are exposed to international competition. This paper examines the guidelines for the Energy Policy for Europe by assessing its effectiveness in achieving the stated environmental targets, assuming not every country in the world will be willing to pursue similar targets. Subsequently, it identifies the major shortcomings in the European policies, that mostly depend on the complexity and possible politicization of the ETS. Finally, it reviews the possible alternatives, by emphasizing the benefits that a revenue-neutral carbon tax might deliver both in terms of reaching the environmental goals, and of the policy’s efficiency and allocational efficiency. Two models of carbon tax are considered: one defined on the basis of the expected social cost from GHGs emissions, the other dependent on a state function that measures the degree of global warming in any given year.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Albrecht, Johan, 2006. "The use of consumption taxes to re-launch green tax reforms," International Review of Law and Economics, Elsevier, vol. 26(1), pages 88-103, March.
- Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
- Kelly, David L. & Kolstad, Charles D., 1999. "Bayesian learning, growth, and pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 491-518, February.
- Martin L. Weitzman, 1974.
"Prices vs. Quantities,"
Review of Economic Studies,
Oxford University Press, vol. 41(4), pages 477-491.
- Andrew J. Leach, 2004.
"The Climate Change Learning Curve,"
Cahiers de recherche
04-03, HEC Montréal, Institut d'économie appliquée.
- Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer.
- Lijesen, Mark G., 2007. "The real-time price elasticity of electricity," Energy Economics, Elsevier, vol. 29(2), pages 249-258, March.
- McKitrick, Ross, 2011. "A simple state-contingent pricing rule for complex intertemporal externalities," Energy Economics, Elsevier, vol. 33(1), pages 111-120, January.
- Al-Faris, Abdul Razak F., 2002. "The demand for electricity in the GCC countries," Energy Policy, Elsevier, vol. 30(2), pages 117-124, January.
- Joskow, Paul L & Schmalensee, Richard, 1998. "The Political Economy of Market-Based Environmental Policy: The U.S. Acid Rain Program," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 37-83, April.
- Dieter Helm, 2005. "Economic Instruments and Environmental Policy," The Economic and Social Review, Economic and Social Studies, vol. 36(3), pages 205-228.
- Till Requate, 1993. "Pollution control in a Cournot duopoly via taxes or permits," Journal of Economics, Springer, vol. 58(3), pages 255-291, October.
- Cameron Hepburn, 2006. "Regulation by Prices, Quantities, or Both: A Review of Instrument Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 226-247, Summer.
- A. Ellerman & Barbara Buchner, 2008. "Over-Allocation or Abatement? A Preliminary Analysis of the EU ETS Based on the 2005–06 Emissions Data," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(2), pages 267-287, October.
- Downing, Paul B. & White, Lawrence J., 1986. "Innovation in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 18-29, March.
- Boonekamp, Piet G.M., 2007. "Price elasticities, policy measures and actual developments in household energy consumption - A bottom up analysis for the Netherlands," Energy Economics, Elsevier, vol. 29(2), pages 133-157, March.
- Requate, Till, 1998. "Incentives to innovate under emission taxes and tradeable permits," European Journal of Political Economy, Elsevier, vol. 14(1), pages 139-165, February.
- Alan D. Woodland, 1993. "A Micro-Econometric Analysis of the Industrial Demand for Energy in NSW," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 57-90.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:48743. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.