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Allocation rules of free allowances in the EU ETS system. A CGE analysis

Michal Antoszewski and Krzysztof Wójtowicz

No 9444, EcoMod2016 from EcoMod

Abstract: Unilateral emission reduction policy conducted by the EU may undermine competitiveness of European industries. In order to mitigate this risk, these industries are granted with free emission allowances based on their historical production („historical allocation”). However, another option which is currently discussed could be the linkage of free allowances amount to the current production level („dynamic allocation”). Such a rule which would not „punish” companies for output increases. Multi-sector, multi-region computable general equilibrium (CGE) model, calibrated to GTAP data. Counterfactual analysis aimed at comparison of various allocation rules. In general, dynamic allocation rule favors industries expected to record a relatively fast grow in the future. However, on the macroeconomic level, dynamic allocation rule differs very little from the historical one.

Keywords: European Union; General equilibrium modeling; Energy and environmental policy (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-ene and nep-env
Date: 2016-07-04
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