Extending the EU Commission's Proposal for a Reform of the EU Emissions Trading System

34 Pages Posted: 27 Apr 2016

See all articles by Stefan P. Schleicher

Stefan P. Schleicher

University of Graz

Angela Köppl

Austrian Institute of Economic Research (WIFO)

Alexander C.M. Zeitlberger

zeb/rolfes.schierenbeck.associates

Date Written: April 26, 2016

Abstract

Pursuing an evidence based approach we summarize the key elements of the European Commission’s proposal of July 2015 for a reform of the EU Emissions Trading System and offer facts about the current state of EU ETS that underline the needs for such a reform. We supply key data for understanding the current state of EU ETS and report in particular the share of freely allocated allowances in emissions for the various sectors since the start of EU ETS in 2005. This is the most relevant parameter for evaluating the stringency and cost impacts of the EU ETS on sectors and installations. We provide propositions for enhancing the allocation procedure of both free and auctioned allowances, the fundamental element in the cap and trade design of this system. We link this procedure closely to the relevant suggestions of the Commission proposal and offer extensions that can make in particular the allocation of free allowances more targeted and effective. We indicate how the impacts of free allowances can be calculated both for sectors and installations and conclude that these reform steps could reduce the administrative burden of the system.

Keywords: EU Emissions Trading System, Reform Options, EU Commission’s Proposal

JEL Classification: Q53, Q54

Suggested Citation

Schleicher, Stefan P. and Köppl, Angela and Zeitlberger, Alexander C.M., Extending the EU Commission's Proposal for a Reform of the EU Emissions Trading System (April 26, 2016). FEEM Working Paper No. 27.2016, Available at SSRN: https://ssrn.com/abstract=2770434 or http://dx.doi.org/10.2139/ssrn.2770434

Stefan P. Schleicher (Contact Author)

University of Graz ( email )

A-8010 Graz
Austria

Angela Köppl

Austrian Institute of Economic Research (WIFO) ( email )

P.O. Box 91
Wien, A-1103
Austria

Alexander C.M. Zeitlberger

zeb/rolfes.schierenbeck.associates ( email )

Germany

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