Assessing Emission Allocation in Europe: An Interactive Simulation Approach

42 Pages Posted: 3 Jul 2004 Last revised: 14 Aug 2008

See all articles by Christoph Böhringer

Christoph Böhringer

University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)

Tim Hoffmann

ZEW – Leibniz Centre for European Economic Research

Andreas Lange

University of Hamburg

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics

Ulf Moslener

Frankfurt School of Finance & Management gemeinnützige GmbH

Date Written: 2004

Abstract

Implementation of an EU-wide emissions trading system by means of National Allocation Plans is at the core of European environmental policy agenda. Member States are faced with the problem of allocating their national emission budgets under the EU Burden Sharing Agreement between energy-intensive sectors that are eligible for international emissions trading and the remaining segments of their economies that will be subject to complementary domestic emission regulation. The country-specific segmentation of national emission budgets between trading sectors and non-trading sectors will determine the cost efficiency of the EU emissions trading system and the gains for each Member State vis-a-vis domestic abatement policies. We present an interactive simulation model where users can specify the design of National Allocation Plans for each EU Member State and then evaluate the induced economic effects. Our numerical framework is based on marginal abatement cost curves for (emissions) trading and non-trading sectors of the EU-15 economies. Illustrative simulations highlight the importance of a coordinated design of National Allocation Plans in order to avoid substantial excess costs of regulation and drastic burden shifting between nontrading and trading sectors.

Keywords: Emissions trading, allowance allocation, National Allocation Plans

JEL Classification: D61, H21, H22, Q58

Suggested Citation

Bohringer, Christoph and Hoffmann, Tim and Lange, Andreas and Löschel, Andreas and Moslener, Ulf, Assessing Emission Allocation in Europe: An Interactive Simulation Approach (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-040. Available at SSRN: https://ssrn.com/abstract=560881 or http://dx.doi.org/10.2139/ssrn.560881

Christoph Bohringer (Contact Author)

University of Oldenburg - Economic Policy ( email )

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
+49 6211235200 (Phone)
+49 6211235226 (Fax)

Tim Hoffmann

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Andreas Lange

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics ( email )

Universitätsstr. 14-16
48143 Munster
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/eroe

Ulf Moslener

Frankfurt School of Finance & Management gemeinnützige GmbH ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

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