EU ETS and the New Green Paradox
19 Pages Posted: 23 Jul 2019
Date Written: 2019
With the new rules of the EU ETS, involving cancellation of allowances, cumulative emissions are no longer fixed but depending on the market outcome. Perino (2018) showed that additional abatement effort can reduce cumulative emissions if it occurs within a few years. This article shows that Perino's result will be reversed, i.e., cumulative emissions increase, if the abatement effort is at a later year, or permanent. Thus, a new green paradox has emerged.
Keywords: emissions trading, green paradox, EU ETS, MSR
JEL Classification: H230, Q540, Q580
Suggested Citation: Suggested Citation