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The impact of administrative transaction costs in the EU emissions trading system

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  • Heindl, Peter

Abstract

This paper empirically investigates the impact of transaction costs for monitoring, reporting, and verification (MRV) of emissions on companies regulated by the EU Emissions Trading System (EU ETS) in Germany. Based on a unique panel dataset, we investigate if MRV costs are dependent on the amount of annual emissions of regulated companies and if there are differences in transaction costs between economic sectors. The results indicate that administrative costs are dependent on the amount of annual emissions for larger companies which has implications for the economic efficiency of the EU ETS. The most important finding, however, is that there are significant differences in MRV transaction costs dependent on the 'type' and 'size' of companies. This implies the existence of considerable economies of scale. Overall, the EU ETS could benefit from reforms by means of a push towards upstream regulation as this would likely increase administrative efficiency.

Suggested Citation

  • Heindl, Peter, 2015. "The impact of administrative transaction costs in the EU emissions trading system," ZEW Discussion Papers 15-076, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:15076
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    Cited by:

    1. Schleich, Joachim & Lehmann, Sascha & Cludius, Johanna & Abrell, Jan & Betz, Regina Annette & Pinkse, Jonatan, 2020. "Active or passive? Companies' use of the EU ETS," Working Papers "Sustainability and Innovation" S07/2020, Fraunhofer Institute for Systems and Innovation Research (ISI).
    2. Baudry, Marc & Faure, Anouk & Quemin, Simon, 2021. "Emissions trading with transaction costs," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    3. Kurz, Antonia, 2024. "Within-country leakage due to the exemption of small emitters from emissions pricing," Journal of Environmental Economics and Management, Elsevier, vol. 124(C).
    4. Bai, Yiyi & Okullo, Samuel J., 2023. "Drivers and pass-through of the EU ETS price: Evidence from the power sector," Energy Economics, Elsevier, vol. 123(C).
    5. Jun Dong & Yu Ma & Hongxing Sun, 2016. "From Pilot to the National Emissions Trading Scheme in China: International Practice and Domestic Experiences," Sustainability, MDPI, vol. 8(6), pages 1-17, May.
    6. Buchholz Wolfgang & Heindl Peter, 2015. "Ökonomische Herausforderungen des Klimawandels," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 16(4), pages 324-350, December.
    7. Lin, Boqiang & Jia, Zhijie, 2018. "The energy, environmental and economic impacts of carbon tax rate and taxation industry: A CGE based study in China," Energy, Elsevier, vol. 159(C), pages 558-568.
    8. Joltreau, Eugénie & Sommerfeld, Katrin, 2016. "Why does emissions trading under the EU ETS not affect firms' competitiveness? Empirical findings from the literature," ZEW Discussion Papers 16-062, ZEW - Leibniz Centre for European Economic Research.
    9. Osberghaus, Daniel & Heindl, Peter & Sommerfeld, Katrin & Höfling, Holger, 2016. "KfW/ZEW CO2 Barometer 2016 - Carbon Edition. How the EU ETS can contribute to meeting the ambitious targets of the Paris Agreement," KfW/ZEW-CO2-Barometer, ZEW - Leibniz Centre for European Economic Research, number 146924.
    10. Johannes Enzmann & Marc Ringel, 2020. "Reducing Road Transport Emissions in Europe: Investigating A Demand Side Driven Approach †," Sustainability, MDPI, vol. 12(18), pages 1-31, September.
    11. Helene Naegele, 2018. "Offset Credits in the EU ETS: A Quantile Estimation of Firm-Level Transaction Costs," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(1), pages 77-106, May.
    12. Naegele, Helene, 2018. "Offset Credits in the EU ETS: A Quantile Estimation of Firm-Level Transaction Costs," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 70(1), pages 77-106.
    13. Wang, Xu & Zhu, Lei & Fan, Ying, 2018. "Transaction costs, market structure and efficient coverage of emissions trading scheme: A microlevel study from the pilots in China," Applied Energy, Elsevier, vol. 220(C), pages 657-671.
    14. Calel, Raphael & Dechezlepretre, Antoine & Venmans, Frank, 2023. "Policing carbon markets," LSE Research Online Documents on Economics 120565, London School of Economics and Political Science, LSE Library.
    15. Wolfgang Eichhammer & Nele Friedrichsen & Sean Healy & Katja Schumacher, 2018. "Impacts of the Allocation Mechanism Under the Third Phase of the European Emission Trading Scheme," Energies, MDPI, vol. 11(6), pages 1-23, June.
    16. Enzmann, Johannes & Ringel, Marc, 2023. "Reducing Road Transport Emissions in Europe: Investigating A Demand Side Driven Approach," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 141745, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    17. Aiwen Zhao & Xiaoqian Song & Jiajie Li & Qingchun Yuan & Yingshun Pei & Ruilin Li & Michael Hitch, 2023. "Effects of Carbon Tax on Urban Carbon Emission Reduction: Evidence in China Environmental Governance," IJERPH, MDPI, vol. 20(3), pages 1-19, January.
    18. John F. Raffensperger, 2020. "A price on warming with a supply chain directed market," Papers 2003.05114, arXiv.org, revised Mar 2021.
    19. Yolanda Fernández Fernández & María Angeles Fernández López & David González Hernández & Blanca Olmedillas Blanco, 2018. "Institutional Change and Environment: Lessons from the European Emission Trading System," Energies, MDPI, vol. 11(4), pages 1-16, March.

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    More about this item

    Keywords

    EU Emissions Trading System; Cap-and-Trade; Transaction Costs; Monitoring; Reporting; and Verification;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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