The EU ETS to 2030 and beyond: adjusting the cap in light of the 1.5°C target and current energy policies

Aleksandar Zaklan (), Jakob Wachsmuth and Vicki Duscha

EconStor Open Access Articles and Book Chapters, 2021, vol. 21, issue 6, 778-791

Abstract: The Paris Agreement calls on countries to pursue efforts to limit global average temperature rise to 1.5°C. We derive a 2016–2050 emission budget for the EU Emissions Trading System (EU ETS) based on cost-effectiveness criteria aimed at achieving the 1.5°C target with a 50%–66% probability, and translate it into a cap reduction path. We show that, under current ETS parameters, the vast majority of this budget will be consumed by 2030. Meeting the budget under current 2030 EU ETS parameters would require drastic – and probably unrealistic – additional efforts after 2030. We derive a cost-effective scenario delivering a smoother and more credible emission pathway. We show that recently increased EU targets for renewable energy and energy efficiency, along with national coal phase-out policies up to 2030 provide cap adjustment potential. If the cap is adjusted to reflect these policies and if phased-out coal capacities are fully substituted through renewable energy, emissions in ETS sectors could decline by 57% through to 2030. This approximates our cost-effective scenario and translates into a linear reduction factor (LRF) for the cap of 3.6% for the period 2021–2030.

Keywords: EU ETS; Cap adjustment; Paris Agreement; Climate policy (search for similar items in EconPapers)
JEL-codes: Q54 Q58 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: The EU ETS to 2030 and beyond: adjusting the cap in light of the 1.5°C target and current energy policies (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:240623

DOI: 10.1080/14693062.2021.1878999

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