The EU Emissions Trading Directive: Opportunities and Potential Pitfalls

Joseph Kruger and William Pizer

No 10679, Discussion Papers from Resources for the Future

Abstract: The European Union is on the verge of establishing an emissions trading program ten times the size of the Acid Rain trading program in the United States. Its design takes advantage of many lessons from existing experience with trading programs, as well as economic theory, and innovates in important ways. While we view this as an impressive development, concerns about equity, enforcement, and efficiency remain. Specifically, a lack of data and weaker environmental institutions in some EU Member States raises questions about both allowance allocations and compliance and enforcement. Although much attention has focused on whether prices will be "too low" in the first phase of the program, a greater risk is that uncertainty about program elements, technology and behavioral response, and external events could create volatile markets and costly compliance in the second phase. Regardless of outcome, the EU trading system will be influential in future international efforts to reduce greenhouse gases.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 62
Date: 2004
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Citations: View citations in EconPapers (30)

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Working Paper: The EU Emissions Trading Directive: Opportunities and Potential Pitfalls (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:rffdps:10679

DOI: 10.22004/ag.econ.10679

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