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EU ETS- broken beyond repair ? An analysis based on Faster principles

Xavier Timbeau () and Pawel Wiejski
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Pawel Wiejski: European Affairs Programme of Sciences Po Paris

No 2017-24, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: The EU ETS is one of the main European climate policies, covering 45 percent of EU’s greenhouse gas emissions. Its main goal is to limit emissions cost-effectively, and to trigger innovations using a strong price signal, making low-carbon technologies more competitive. While emissions reduction targets for 2020 have already been achieved, the exact role of the ETS in this success remains controversial. The assessment is crucial, as more and more countries and regions plan to adopt similar policies to achieve their targets expressed in the Intended Nationally Determined Contributions, communicated at the Paris Conference of the Parties. The EU ETS, as the longest running and largest carbon market in the world, will undoubtedly serve as a point of reference. This paper attempts to provide a comprehensive analysis of the policy. First part outlines the historical development of emission trading systems, as well as the development of the EU ETS since its inception in 2005. Second part uses FASTER principles developed by the World Bank and the OECD to perform a multi-criteria, qualitative analysis of the EU ETS in its current form. Third part concentrates on the upcoming revision for the fourth phase, evaluating whether the proposals correctly address the policy’s shortcomings. It also provides some alternative reform proposals.

Keywords: Cap-and-trade; EU ETS; Market stability reserve; Carbon price (search for similar items in EconPapers)
JEL-codes: H23 H87 Q56 (search for similar items in EconPapers)
Date: 2017-10-26
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-reg
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