IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Ten-Year Rule: Allocation of Emission Allowances in the EU Emission Trading System

  • Burtraw, Dallas

    ()

    (Resources for the Future)

  • Kruger, Joseph
  • Zetterberg, Lars
  • Åhman, Markus

In its guidance on National Allocation Plans (NAPs), the European Commission has discouraged Member States from adopting allocation methodologies that would provide incentives to firms affecting their compliance behavior. The purpose is to promote economic efficiency and to prevent strategic behavior that deviates from individual and collective cost-minimization. For example, some methodologies would reward one type of compliance investment over another. To discourage such actions, the EU Emission Trading System guidelines prohibit ex post redistribution of emission allowances within an allocation period based on behavior in that period. Similarly, the Commission has indicated that decisions about the initial distribution of allowances in the second phase (2008-2012) must depend on measures prior to 2005 so as not to give companies an incentive to adjust their behavior to receive a larger allowance allocation. However, two other aspects of the NAPs—the treatment of closures and new entrants—may also affect firm behavior. An undercurrent in these guidelines is the question of whether Member States should allow incumbent emitters to hold infinitely lived, once-and-for-all property rights to a share of the emission allowances in the future. This paper develops an approach for balancing efficiency considerations with perceived issues of fairness. We propose a ten-year rule to guide policy regarding closure of existing sources and the status of new sources and to guide the initial distribution of emission allowances in general. A ten-year rule would address issues of fairness and capture an important part of the potential gains that could be achieved through an efficient initial distribution of allowances.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.rff.org/RFF/documents/RFF-DP-05-30.pdf
Download Restriction: no

Paper provided by Resources For the Future in its series Discussion Papers with number dp-05-30.

as
in new window

Length:
Date of creation: 27 Jun 2005
Date of revision:
Handle: RePEc:rff:dpaper:dp-05-30
Contact details of provider: Web page: http://www.rff.org

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.:

as in new window
  1. A. Lans Bovenberg & Lawrence H. Goulder, 2000. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does it Cost?," NBER Working Papers 7654, National Bureau of Economic Research, Inc.
  2. Boemare, Catherine & Quirion, Philippe, 2002. "Implementing greenhouse gas trading in Europe: lessons from economic literature and international experiences," Ecological Economics, Elsevier, vol. 43(2-3), pages 213-230, December.
  3. Böhringer, Christoph & Lange, Andreas, 2004. "Mission Impossible!? On the Harmonization of National Allocation Plans under the EU Emissions Trading Directive," ZEW Discussion Papers 04-15, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Burtraw, Dallas & Palmer, Karen & Bharvirkar, Ranjit & Paul, Anthony, 2002. "The Effect on Asset Values of the Allocation of Carbon Dioxide Emission Allowances," Discussion Papers dp-02-15-, Resources For the Future.
  5. Lawrence H. Goulder & Ian W. H. Parry & Roberton C. Williams III & Dallas Burtraw, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," NBER Working Papers 6464, National Bureau of Economic Research, Inc.
  6. Peter Cramton & Suzi Kerr, 2002. "Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Papers of Peter Cramton 02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
  7. Pizer, William & Kruger, Joseph, 2004. "The EU Emissions Trading Directive: Opportunities and Potential Pitfalls," Discussion Papers dp-04-24, Resources For the Future.
  8. repec:reg:rpubli:190 is not listed on IDEAS
  9. Carlo Carraro & Gilbert E. Metcalf, 2000. "Behavioral and Distributional Effects of Environmental Policy: Introduction," Discussion Papers Series, Department of Economics, Tufts University 0011, Department of Economics, Tufts University.
  10. Stavins, Robert, 2005. "Vintage-Differentiated Environmental Regulation," Working Paper Series rwp05-065, Harvard University, John F. Kennedy School of Government.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-05-30. 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: (Webmaster)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.