This paper develops a methodology aimed at assisting policymakers in selecting the optimal policy option to support the carbon price within the ETS. We consider different policy proposals that can support the carbon price either by intervening on the ETS cap (-30%, set-aside, carbon central...

We compare a carbon tax and a cap and trade mechanism in their propensity to induce carbon-reducing technological adoption, when investments are undertaken under uncertainty. In our setting, risk-neutral firms affect the variance and the correlation of the shocks they are exposed to through...

Emissions trading is becoming increasingly popular in environmental law. Allowances to trade emissions can either be auctioned off or handed out free of charge by means of grandfathering. Although grandfathering is frequently used in emissions trading schemes, it is a popular view in the...