The supply of allowances in the European Union Emissions Trading System is determined within a rigid allocation programme. A reform of the EU ETS intends to make allowances allocation flexible and contingent on the state of the system. We model the emissions market under adjustable allowance...

As the largest greenhouse gas emissions trading scheme in the world, the European Union Emissions Trading Scheme (EU ETS) is a benchmark for carbon prices worldwide. A price for carbon represents a cost for emissions-intensive activities under the EU ETS, which must be taken into account by...