Combining cap-and-trade with offsets: Lessons from CER use in the EU ETS in 2008 and 2009

The EU ETS is the first full scale example of a cap and trade system linked to project based mechanisms. While most papers on the subject focus on the policy design point of view, few have analyzed the facts. Offsets have been used by European industrial installations in 2008 and 2009. If the linking with an offset mechanism is successful, one should find evidence that offsets are used on a large scale, i.e. that significant volumes of credits go from a large number of projects to a large number of installations, independently from their sector, size or position, and that the limit of import is fully used at the end of the phase. This paper is an ex-post analysis of offsets used in the EU ETS in terms of intensity, frequency, and efficiency. This allows us to answer partially those questions and to identify possible explaining factors.