On the Effectiveness of the EU ETS

Jaume Freire González and Arlet Vila-Bagaria

No 1581, Working Papers from Barcelona School of Economics

Abstract: We evaluate the effectiveness of the European Union Emissions Trading System (EU ETS). Using a staggered difference-in-differences design exploiting variation in adoption timing across countries and phases from 1990–2022, our estimates suggest that the EU ETS is associated with substantial reductions in emissions overall—especially among early participants—although effectiveness varied across cohorts and regions. Later entrants (2008, 2013) showed weaker effects, but disaggregated estimates revealed notable regional reductions. Phase III reforms—tighter caps and expanded auctioning—enhanced performance, cutting emissions by 24MtCO2 annually by 2020. Overall, the EU ETS has become more effective as its design matured but remains insufficient to meet EU's emissions 2030 targets.

Keywords: carbon markets; climate policy; differences-in-differences; EU Emissions Trading System (search for similar items in EconPapers)
JEL-codes: D62 H23 L50 Q52 Q54 Q58 (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1581

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