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The cost of sectoral differentiation in the EU emissions trading scheme

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  • Steffen Kallbekken

Abstract

It is often assumed in the economic literature that the Kyoto Protocol will be implemented through a cost-efficient, comprehensive emissions trading system. However, the general experience from implementation of environmental policies suggests that governments will adopt a more differentiated approach. Emerging evidence on how the Kyoto Protocol will be implemented confirms this: climate commitments will be differentiated between sectors. This article assesses the welfare effects associated with implementing the EU Emissions Trading Directive. It also analyses how differentiation of commitments affects the sectors that have a permit obligation compared with those that are exempted from it. The findings indicate that sectoral differentiation comes at a relatively high welfare cost-almost doubling the cost of implementing the Kyoto Protocol, with only limited benefits to the sectors that are granted concessions.

Suggested Citation

  • Steffen Kallbekken, 2005. "The cost of sectoral differentiation in the EU emissions trading scheme," Climate Policy, Taylor & Francis Journals, vol. 5(1), pages 47-60, January.
    • Handle: RePEc:taf:tcpoxx:v:5:y:2005:i:1:p:47-60
    DOI: 10.1080/14693062.2005.9685540
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    References listed on IDEAS

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    1. Markussen, Peter & Svendsen, Gert Tinggaard, 2005. "Industry lobbying and the political economy of GHG trade in the European Union," Energy Policy, Elsevier, vol. 33(2), pages 245-255, January.
    2. Convery, Frank J. & Redmond, Luke & Dunne, Louise & Ryan, Lisa B., 2003. "Assessing the European Union emissions trading directive," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 3(06), pages 1-15.
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    Cited by:

    1. Anger, Niels & Böhringer, Christoph & Oberndorfer, Ulrich, 2008. "Public Interest vs. Interest Groups: Allowance Allocation in the EU Emissions Trading Scheme," ZEW Discussion Papers 08-023, ZEW - Leibniz Centre for European Economic Research.
    2. Florian Landis & Sebastian Rausch & Mirjam Kosch, 2018. "Differentiated Carbon Prices and the Economic Cost of Decarbonization," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 483-516, June.
    3. Niels Anger & Christoph Böhringer & Andreas Lange, 2015. "The political economy of energy tax differentiation across industries: theory and empirical evidence," Journal of Regulatory Economics, Springer, vol. 47(1), pages 78-98, February.
    4. Ying Fan & Xu Wang, 2014. "Which Sectors Should Be Included in the Ets in the Context of a Unified Carbon Market in China?," Energy & Environment, , vol. 25(3-4), pages 613-634, April.
    5. Eskeland, Gunnar S. & Rive, Nathan A. & Mideksa, Torben K., 2012. "Europe’s climate goals and the electricity sector," Energy Policy, Elsevier, vol. 41(C), pages 200-211.
    6. Alexander Vasa, 2010. "Implementing CDM Limits in the EU ETS: A Law and Economics Approach," Discussion Papers of DIW Berlin 1032, DIW Berlin, German Institute for Economic Research.

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