Emissions Trading Hybrids: The Case of the EU ETS
Woerdman Edwin () and
Nentjes Andries ()
Additional contact information
Nentjes Andries: Faculty of Law, Department of Business Law, European Law and Tax Law, University of Groningen, PO Box 716, Groningen9700 AS, the Netherlands
Review of Law & Economics, 2019, vol. 15, issue 1, 32
We argue that the European Union Emissions Trading System (EU ETS) has evolved into a hybrid of two design variants, allowance trading (cap-and-trade) and credit trading (performance standard rate trading), with an added feature of industry support to minimize carbon leakage. In particular the current rules tying free allowances to production capacity expansion, plant closure and capacity use have transformed the efficient cap-and-trade program that stood at the origins of the EU ETS into a system that even surpasses credit trading in paying hidden product subsidies to firms. This combination of rules encourages an inefficiently high level of investment in production capacity and an inefficiently high output in industries exposed to international competition. The result is a sub-optimal EU Emissions Trading ‘Hybrid’ (which we therefore label as ‘EU ETH’).
Keywords: European Union Emissions Trading System; economic efficiency; cap-and-trade; performance standard rate trading; carbon leakage (search for similar items in EconPapers)
JEL-codes: D21 D62 K32 Q48 Q54 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.degruyter.com/view/j/rle.2019.15.issue ... -0054.xml?format=INT (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bpj:rlecon:v:15:y:2019:i:1:p:32:n:1
Ordering information: This journal article can be ordered from
Access Statistics for this article
Review of Law & Economics is currently edited by Francesco Parisi
More articles in Review of Law & Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().