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Emissions Trading as a Policy InstrumentEvaluation and Prospects$
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Marc Gronwald and Beat Hintermann

Print publication date: 2015

Print ISBN-13: 9780262029285

Published to MIT Press Scholarship Online: January 2016

DOI: 10.7551/mitpress/9780262029285.001.0001

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Interaction between EU Instruments and Member-State Instruments

Interaction between EU Instruments and Member-State Instruments

The End of CO2 Emissions Trading in Europe?

Chapter:
(p.149) 7 Interaction between EU Instruments and Member-State Instruments
Source:
Emissions Trading as a Policy Instrument
Author(s):

A. J. Mulder

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262029285.003.0007

EU member-states rely on both a collectively governed EU Emissions Trading Scheme (EU ETS) as well as a wide array of national instruments that operate in parallel with the EU ETS. Parallel instruments tend to undermine the strength of the ETS-based carbon price. In this chapter, we estimate when parallel instruments force the EU ETS into redundancy, permanently driving the carbon price down to €0. Probabilistic analysis shows that redundancy of the EU ETS is certain if the parallel instruments trigger more abatement than 45 MtCO2/yr. If parallel instruments trigger more abatement than 20 MtCO2/yr., redundancy of the EU ETS depends on the economic growth rate around Europe. The lower the economic growth rate the greater the likelihood of ETS redundancy. Note that the thresholds levels can be significantly below these estimates if either policymakers or firms lack full commitment to the EU ETS.

Keywords:   EU ETS, instruments, targets, interaction, carbon price, abatement, policy space, congestion

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