When it was launched in 2005, the European Union emissions trading system (EU ETS) was projected to have prices of around €30/ton CO2 and to be a cornerstone of the EU's climate policy. The reality was a cascade of falling prices, a ballooning privately held emissions bank, and a decade of low...

This paper discusses lessons that other regions could learn from European Union's effort to implement carbon pricing through EU Emission Trading System (EU ETS). Our lessons are, first of all, that a cap-and-trade system like EU ETS is very helpful in guaranteeing a credible and binding...

According to the Phase IV (2021-2030) rules of the EU ETS, the total amount of emissions permits allocated to firms is not fixed but endogenous. This implies that a national climate policy that overlaps with the emission trading system can have an impact on total aggregate emissions. Roughly...

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...

We investigate the displacement effects of phase-out-of-coal policies in a stylized model of electricity generation and CO2 regulation, in which a group of countries operates an emissions trading scheme (ETS). Electricity markets are either international or national and the emissions cap remains...

In June 2018, an agreement between key EU institutions – the Commission, the European Parliament, and the European Council – was reached after a long-lasting discourse over the 2030 EU climate and energy policy package. This paper offers a comprehensive assessment of the EU package, with its...

Long-term commitment is crucial for the dynamic efficiency of intertemporal cap-and-trade programs. Discretionary interventions in such programs could destabilize the market, and necessitate subsequent corrective interventions that instigate regulatory instability (Kydland and Prescott, 1977)....

This paper uses a discrete-time partial equilibrium model of the European Emissions Trading System (EU ETS) to analyze the impact of the recent reform on allowance prices. By including bounded rationality such as myopia or hedging requirements, we find that the Hotelling price path is no longer...

Policy makers in the EU and elsewhere are concerned that unilateral carbon pricing induces carbon leakage through relocation of emission-intensive and trade-exposed industries to other regions. A common measure to mitigate such leakage is to combine an emission trading system (ETS) with...

We consider the question of how to integrate carbon emissions in comprehensive national accounts for the purpose of indicating whether countries’ development is sustainable. We derive an expression for national saving which includes not only the national effect of current global emissions, but...