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The impact of emissions-performance benchmarking on free allocations in EU ETS Phase 3

Author

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  • Stephen Lecourt

    (Chaire d\'économie du climat - LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

  • Clément Pallière

    (CDC Climat Research - CDC Climat Research - Caisse des Depots)

  • Oliver J. Sartor

    (CDC Climat Research - Caisse des Depots)

Abstract

From Phase 3 (2013-20) of the European Union Emissions Trading Scheme carbon-intensive industrial emitters will receive free allocations based on harmonised, EU-wide benchmarks. This paper analyses and evaluates the impacts of these new rules on allocations to key energy-intensive sectors. It exploits an original dataset that combines recent data from the National Implementing Measures of 20 Member States with the Community Independent Transaction Log and ETS-installation NACE code data. The analysis reveals that free allocations to benchmarked sectors will be reduced significantly, though not excessively, in Phase 3. This reduction should both increase public revenues from carbon auctions and has the potential to enhance the economic efficiency of the carbon market. The analysis also shows that changes in allocation vary mostly across installations within, rather than across, countries. Lastly, the analysis finds evidence that the new rules will, as intended, reward installations with better emissions performance, and will improve harmonisation of free allocations in the EU ETS by reducing differences in allocation levels across countries with similar carbon intensities of production.

Suggested Citation

  • Stephen Lecourt & Clément Pallière & Oliver J. Sartor, 2013. "The impact of emissions-performance benchmarking on free allocations in EU ETS Phase 3," Working Papers hal-00809096, HAL.
    • Handle: RePEc:hal:wpaper:hal-00809096
    Note: View the original document on HAL open archive server: https://hal.science/hal-00809096v1
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    References listed on IDEAS

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    1. Ralf Martin & Mirabelle Mu?ls & Laure B. de Preux & Ulrich J. Wagner, 2014. "Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," American Economic Review, American Economic Association, vol. 104(8), pages 2482-2508, August.
    2. Frédéric Branger & Oskar Lecuyer & Philippe Quirion, 2015. "The European Union Emissions Trading Scheme: should we throw the flagship out with the bathwater?," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 6(1), pages 9-16, January.
    3. Yanbin Li & Zhen Li & Min Wu & Feng Zhang & Gejirifu De, 2018. "Regional-Level Allocation of CO 2 Emission Permits in China: Evidence from the Boltzmann Distribution Method," Sustainability, MDPI, vol. 10(8), pages 1-16, July.
    4. Xiong, Ling & Shen, Bo & Qi, Shaozhou & Price, Lynn & Ye, Bin, 2017. "The allowance mechanism of China’s carbon trading pilots: A comparative analysis with schemes in EU and California," Applied Energy, Elsevier, vol. 185(P2), pages 1849-1859.
    5. Misato Sato & Karsten Neuhoff & Verena Graichen & Katja Schumacher & Felix Matthes, 2015. "Sectors Under Scrutiny: Evaluation of Indicators to Assess the Risk of Carbon Leakage in the UK and Germany," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 99-124, January.
    6. Bin Ye & Jingjing Jiang & Lixin Miao & Ji Li & Yang Peng, 2015. "Innovative Carbon Allowance Allocation Policy for the Shenzhen Emission Trading Scheme in China," Sustainability, MDPI, vol. 8(1), pages 1-23, December.

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