Low carbon transition of the EU-ETS firms: Assessing the long-term effects of Covid-19

Marc Baudry

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Abstract: This chapter is a first attempt to assess the potential effects over time of the Covid-19 crisis on the decarbonation of the economy. The focus is more specifically on the dynamics of the European Union Emission Trading System. For this purpose, the interactions between an emissions abatement strategy and a low-carbon investment strategy within the framework of an intertemporal emissions trading system are investigated. An original model is developed and then calibrated. Simulation results suggest that the Covid-19 crisis is unlikely to accelerate the transition to a low-carbon economy. The exogenous shock associated with the Covid-19 crisis increases the price of permits and the stock of "green" capital only in the short term but this impact fades, or even reverses, rapidly in the medium and long term. In the long term, the slowdown of low carbon investments dominates.

Keywords: EU-ETS; Covid-19; Low-carbon transition (search for similar items in EconPapers)
Date: 2021
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Published in Energy Transition, Climate Change, and COVID-19. Economic Impacts of the Pandemic, Springer, pp.45 - 72, 2021

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Chapter: Low-Carbon Transition of EU-ETS Firms: Assessing the Long-Term Effects of Covid-19 (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03564449

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