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The EU ETS price may continue to be low for the foreseeable future – Should we care?

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  • Elkerbout, Milan
  • Egenhofer, Christian

Abstract

Carbon prices in the EU ETS have been low for a number of years and might remain at relatively low levels for the foreseeable future. That does not mean that the EU ETS, or the price signal it produces, is meaningless. Incentives to abate greenhouse gas emissions exist at any price level (it is just stronger with higher prices). This is true even if the impact is different between the power and industrial sectors, partly but not only because of the difference in allocation rules. What the ETS price signal does not drive, however, is long-term investment decisions, which are more a function of price expectations and expected returns on investment.

Suggested Citation

  • Elkerbout, Milan & Egenhofer, Christian, 2017. "The EU ETS price may continue to be low for the foreseeable future – Should we care?," CEPS Papers 12666, Centre for European Policy Studies.
    • Handle: RePEc:eps:cepswp:12666
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    File URL: https://www.ceps.eu/system/files/PI_2017-22_MEandCE_ETSPriceSignal%20%282%29.pdf
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    Cited by:

    1. Klaus Gugler & Adhurim Haxhimusa & Mario Liebensteiner, 2019. "Effective Climate Policy Doesn’t Have to be Expensive," Department of Economics Working Papers wuwp293, Vienna University of Economics and Business, Department of Economics.
    2. Rizos, Vasileios & Egenhofer, Christian & Elkerbout, Milan, 2019. "Circular economy for climate neutrality: Setting the priorities for the EU," CEPS Papers 25584, Centre for European Policy Studies.

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