Industry-level emission trading between power producers in the EU

Christoph Bohringer

Applied Economics, 2002, vol. 34, issue 4, 523-533

Abstract: This paper investigates how restrictions for emission trading to the energy-intensive power sector will affect the magnitude and distribution of abatement costs across EU countries vis-a-vis a comprehensive EU emission trading regime. It is found that emission trading between European power sectors allows the harvest of a major part of the efficiency gains provided by full trade as compared to strictly domestic action. However, trade restrictions may create a more unequal distribution of abatement costs across member states than is the case for a comprehensive trade regime. The reason for this is that restricted permit trade enhances secondary terms-of-trade benefits to EU member countries with low marginal abatement costs at the expense of the other EU member states.

Date: 2002
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DOI: 10.1080/00036840110052163

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