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Emissions Abatement: the Role of EU ETS and Free Allowances. The Italian Case

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This paper uses Italian data on industrial plant emissions over a 12 years period to assess the differential impact of negative shocks in the allocation of free allowances across various industrial sectors in the context of the EU Emission Trading Scheme (ETS). Specifically, it examines the consequences of reduced free allowances for certain sectors in contrast to those that maintain their existing allocation. By using a novel indicator of emission intensity based on quantity this study shows that the absence of free allowances does not directly impact the incentive to abate emissions but foster the entry of cleaner producers. The results offer evidence of regional heterogeneity by analysing the variations in policy effects between the South and the North of Italy.

Suggested Citation

  • Carla Guerriero & Antonia Pacelli, 2023. "Emissions Abatement: the Role of EU ETS and Free Allowances. The Italian Case," CSEF Working Papers 698, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:698
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    1. Marit Klemetsen & Knut Einar Rosendahl & Anja Lund Jakobsen, 2020. "The Impacts Of The Eu Ets On Norwegian Plants’ Environmental And Economic Performance," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-32, February.
    2. Dechezleprêtre, Antoine & Nachtigall, Daniel & Venmans, Frank, 2023. "The joint impact of the European Union emissions trading system on carbon emissions and economic performance," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    3. Raphael Calel & Antoine Dechezleprêtre, 2016. "Environmental Policy and Directed Technological Change: Evidence from the European Carbon Market," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 173-191, March.
    4. Naegele, Helene & Zaklan, Aleksandar, 2019. "Does the EU ETS cause carbon leakage in European manufacturing?," Journal of Environmental Economics and Management, Elsevier, vol. 93(C), pages 125-147.
    5. Christoph Böhringer & Carolyn Fischer & Knut Einar Rosendahl & Thomas Fox Rutherford, 2022. "Potential impacts and challenges of border carbon adjustments," Nature Climate Change, Nature, vol. 12(1), pages 22-29, January.
    6. Christoph Böhringer & Carolyn Fischer & Knut Einar Rosendahl & Thomas Fox Rutherford, 2022. "Author Correction: Potential impacts and challenges of border carbon adjustments," Nature Climate Change, Nature, vol. 12(4), pages 408-408, April.
    7. D'Arcangelo, Maria Filippo & Galeotti, Marzio, 2022. "Environmental Policy and Investment Location: The Risk of Carbon Leakage in the EU ETS," FEEM Working Papers 327158, Fondazione Eni Enrico Mattei (FEEM).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Carbon pricing; free allowances; carbon leakage; emission intensity.;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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