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EU ETS emissions under the cancellation mechanism - Effects of national measures

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  • Carlén, Björn
  • Dahlqvist, Anna
  • Mandell, Svante
  • Marklund, Pelle

Abstract

Beginning in 2023, allowances held in the market stability reserve of the EU ETS above the number of allowances auctioned the previous year will be cancelled. In this paper, we analyse the consequences of this new cancellation mechanism. Using numerical analysis, we show that additional national abatement measures now have the potential to reduce total EU ETS emissions. A key insight is that, for this to happen, domestic emission reductions must occur early. How early depends crucially on how the future demand for allowances evolve. To facilitate an understanding of the rather complex system the reformed EU ETS constitutes, we present a series of extensions to the analysis to show how the results are affected by, for example, future emission levels, technological development, optimising agents and speculative trading in allowances.

Suggested Citation

  • Carlén, Björn & Dahlqvist, Anna & Mandell, Svante & Marklund, Pelle, 2019. "EU ETS emissions under the cancellation mechanism - Effects of national measures," Energy Policy, Elsevier, vol. 129(C), pages 816-825.
    • Handle: RePEc:eee:enepol:v:129:y:2019:i:c:p:816-825
    DOI: 10.1016/j.enpol.2019.02.060
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    Cited by:

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    4. Anke, Carl-Philipp & Hobbie, Hannes & Schreiber, Steffi & Möst, Dominik, 2020. "Coal phase-outs and carbon prices: Interactions between EU emission trading and national carbon mitigation policies," Energy Policy, Elsevier, vol. 144(C).
    5. Bruninx, Kenneth & Ovaere, Marten & Delarue, Erik, 2020. "The long-term impact of the market stability reserve on the EU emission trading system," Energy Economics, Elsevier, vol. 89(C).
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    7. Sitarz, Joanna & Pahle, Michael & Osorio, Sebastian & Luderer, Gunnar & Pietzcker, Robert, 2023. "EU carbon prices signal high policy credibility and farsighted actors," EconStor Preprints 280455, ZBW - Leibniz Information Centre for Economics.
    8. Bocklet, Johanna & Hintermayer, Martin & Schmidt, Lukas & Wildgrube, Theresa, 2019. "The Reformed EU ETS - Intertemporal Emission Trading with Restricted Banking," EWI Working Papers 2019-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
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    10. Joanna Sitarz & Michael Pahle & Sebastian Osorio & Gunnar Luderer & Robert Pietzcker, 2024. "EU carbon prices signal high policy credibility and farsighted actors," Nature Energy, Nature, vol. 9(6), pages 691-702, June.
    11. Bersani, Alberto M. & Falbo, Paolo & Mastroeni, Loretta, 2022. "Is the ETS an effective environmental policy? Undesired interaction between energy-mix, fuel-switch and electricity prices," Energy Economics, Elsevier, vol. 110(C).
    12. Li, Changsheng & Qi, Yaping & Liu, Shaohui & Wang, Xu, 2022. "Do carbon ETS pilots improve cities' green total factor productivity? Evidence from a quasi-natural experiment in China," Energy Economics, Elsevier, vol. 108(C).
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    14. Quemin, Simon, 2022. "Raising climate ambition in emissions trading systems: The case of the EU ETS and the 2021 review," Resource and Energy Economics, Elsevier, vol. 68(C).
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    17. Bocklet, Johanna, 2020. "The Reformed EU ETS in Times of Economic Crises: the Case of the COVID-19 Pandemic," EWI Working Papers 2020-10, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    18. Ulrik Beck & Peter K. Kruse-Andersen, 2020. "Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(4), pages 781-811, December.
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    20. Simon Quemin, 2020. "Using Supply-Side Policies to Raise Ambition: The Case of the EU ETS and the 2021 Review," Working Papers 2002, Chaire Economie du climat.

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