The Drivers of Emission Reductions in the European Carbon Market

Hilde C. Bjørnland, Jamie Cross and Felix Kapfhammer
Authors registered in the RePEc Author Service: Hilde Christiane Bjørnland ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper studies the drivers of emission reductions in the carbon market of the European Union Emission Trading System (EU ETS) since its inception in 2005. We introduce a novel empirical framework that facilitates the joint identification of simultaneous demand and supply shocks underlying the European carbon market. We find that emission supply restrictions of the EU ETS were the dominant driver of emissions reductions, reducing emissions by 46%. However we also find that two opposing emission demand factors also played an important role. Demand from industrial economic activity increased emissions by 15%, while other demand-side factors, primarily reflecting the transition to low-carbon economies, reduced emissions by 21%.

Keywords: climate policy; carbon pricing; emission trading system; cap and trade; demand and supply (search for similar items in EconPapers)
JEL-codes: Q41 Q54 Q58 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2023-10
New Economics Papers: this item is included in nep-eec, nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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https://cama.crawford.anu.edu.au/sites/default/fil ... cross_kapfhammer.pdf

Related works:
Working Paper: The Drivers of Emission Reductions in the European Carbon Market (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-53

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