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

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  • Michal Antoszewski
  • Krzysztof Wójtowicz

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.

Suggested Citation

  • Michal Antoszewski & Krzysztof Wójtowicz, 2016. "Allocation rules of free allowances in the EU ETS system. A CGE analysis," EcoMod2016 9444, EcoMod.
    • Handle: RePEc:ekd:009007:9444
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    References listed on IDEAS

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    Keywords

    European Union; General equilibrium modeling (CGE); Energy and environmental policy;
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