Higher Price, Lower Costs? Minimum Prices in the EU Emissions Trading Scheme

Jan Abrell, Sebastian Rausch and Hidemichi Yonezawa

No 16/243, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This paper examines the efficiency and distributional impacts of introducing a price floor in an emissions trading system (ETS) when environmental regulation is partitioned. We theoretically characterize the conditions under which a price floor enhances welfare. Using a multi-country multi-sector numerical general equilibrium model of the European carbon market, we find that moderate minimum price levels in the EU ETS can reduce the costs of EU climate policy by up to thirty percent and yield outcomes close to uniform carbon pricing. Moreover, most of the EU Member States would gain. Our results are robust with respect to parametric uncertainty in production and consumption technologies.

Keywords: Emissions Trading; Price Floors; EU ETS; Partitioned Environmental Regulation; General Equilibrium (search for similar items in EconPapers)
JEL-codes: C68 H23 Q52 Q58 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-04
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env, nep-eur and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Higher Price, Lower Costs? Minimum Prices in the EU Emissions Trading Scheme (2019)
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