Assessing the EU ETS Effectiveness in Reaching the Kyoto Target: An Analysis of the Cap Stringency

Rotterdam Institute of Law and Economics (RILE) Working Paper Series No. 2008/14

32 Pages Posted: 20 Oct 2008 Last revised: 12 Jan 2014

See all articles by Stefano Clò

Stefano Clò

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM)

Date Written: September 24, 2008

Abstract

The purpose of this article is to contribute with new insight to the widespread debate aimed at assessing the Emissions Trading Scheme (ETS) effectiveness in promoting emissions reduction. A theoretical benchmark consistent with the Polluter Pays Principle is determined to assess the ETS cap stringency and to evaluate if emissions tradable permits have been over-allocated by national and European authorities. This assessment clarifies how the emissions reduction burden deriving from the Kyoto Protocol ratification has been divided between ETS and non-ETS sectors. This analysis highlights to which extent Member States effectively rely on the ETS to comply with their Kyoto commitment and which inefficiencies emerge under permits over-allocation: namely cross-subsidization from non-ETS to ETS sectors, national subsidy to the ETS sectors and distortion of competition.

Keywords: Emissions Trading Scheme, Cap and Trade, Over-allocation, National Allocation Plan, Polluter Pays Principle

Suggested Citation

Clò, Stefano, Assessing the EU ETS Effectiveness in Reaching the Kyoto Target: An Analysis of the Cap Stringency (September 24, 2008). Rotterdam Institute of Law and Economics (RILE) Working Paper Series No. 2008/14. Available at SSRN: https://ssrn.com/abstract=1273048 or http://dx.doi.org/10.2139/ssrn.1273048

Stefano Clò (Contact Author)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

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