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Remove or reserve? Allowance prices and design choices in Phase IV of the EU Emission Trading System

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  • Perino, Grischa
  • Willner, Maximilian

Abstract

The final design choices for Phase IV of the EU ETS are about to be made. With the introduction of the market stability reserve several additional design parameters have been introduced into the EU ETS. This paper explores how changes in these parameters impact on allowance price paths. Four parameters are investigated. They differ substantially in whether, how and when they affect allowance prices. Finally, the proposal by the environmental committee of the European Parliament from December 2016 is projected to unambiguously increase prices at all points in time but to render the market stability reserve (almost) redundant.

Suggested Citation

  • Perino, Grischa & Willner, Maximilian, 2017. "Remove or reserve? Allowance prices and design choices in Phase IV of the EU Emission Trading System," WiSo-HH Working Paper Series 36, University of Hamburg, Faculty of Business, Economics and Social Sciences, WISO Research Laboratory.
    • Handle: RePEc:zbw:uhhwps:36
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    References listed on IDEAS

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