Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4

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Standard

Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4. / Beck, Ulrik Richardt; Kruse-Andersen, Peter Kjær.

I: Environmental and Resource Economics, Bind 77, 2020, s. 781–811.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningfagfællebedømt

Harvard

Beck, UR & Kruse-Andersen, PK 2020, 'Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4', Environmental and Resource Economics, bind 77, s. 781–811. https://doi.org/10.1007/s10640-020-00518-w

APA

Beck, U. R., & Kruse-Andersen, P. K. (2020). Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4. Environmental and Resource Economics, 77, 781–811. https://doi.org/10.1007/s10640-020-00518-w

Vancouver

Beck UR, Kruse-Andersen PK. Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4. Environmental and Resource Economics. 2020;77:781–811. https://doi.org/10.1007/s10640-020-00518-w

Author

Beck, Ulrik Richardt ; Kruse-Andersen, Peter Kjær. / Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4. I: Environmental and Resource Economics. 2020 ; Bind 77. s. 781–811.

Bibtex

@article{c2d90001bc364a198194e6d01d212d02,
title = "Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4",
abstract = "In early 2018, a reform of the world’s largest functioning greenhouse gas emissions cap-and-trade system, the EU Emissions Trading System (ETS), was formally approved. The reform changed the main principles of the system by endogenizing the emissions cap. We show that the emissions cap is now affected by the allowance demand and is therefore no longer set directly by EU policymakers. As a consequence, national policies that reduce allowance demand can now reduce long-run cumulative emissions, which is not possible in a standard cap-and-trade system. Using a newly developed dynamic model of the EU ETS, we show that policies that reduce allowance demand can have substantial effects on cumulative emissions after the reform. Model simulations also suggest that the reform reduces long-run cumulative emissions and, to a lesser extent, reduces emissions in the short run. Even so, the reform has a small short-run impact on the currently large allowance surplus.",
keywords = "Faculty of Social Sciences, Cap-and-trade system, EU ETS, Market Stability Reserve, Overlapping policies",
author = "Beck, {Ulrik Richardt} and Kruse-Andersen, {Peter Kj{\ae}r}",
year = "2020",
doi = "10.1007/s10640-020-00518-w",
language = "English",
volume = "77",
pages = "781–811",
journal = "Environmental and Resource Economics",
issn = "0924-6460",
publisher = "Springer",

}

RIS

TY - JOUR

T1 - Endogenizing the Cap in a Cap-and-Trade System: Assessing the Agreement on EU ETS Phase 4

AU - Beck, Ulrik Richardt

AU - Kruse-Andersen, Peter Kjær

PY - 2020

Y1 - 2020

N2 - In early 2018, a reform of the world’s largest functioning greenhouse gas emissions cap-and-trade system, the EU Emissions Trading System (ETS), was formally approved. The reform changed the main principles of the system by endogenizing the emissions cap. We show that the emissions cap is now affected by the allowance demand and is therefore no longer set directly by EU policymakers. As a consequence, national policies that reduce allowance demand can now reduce long-run cumulative emissions, which is not possible in a standard cap-and-trade system. Using a newly developed dynamic model of the EU ETS, we show that policies that reduce allowance demand can have substantial effects on cumulative emissions after the reform. Model simulations also suggest that the reform reduces long-run cumulative emissions and, to a lesser extent, reduces emissions in the short run. Even so, the reform has a small short-run impact on the currently large allowance surplus.

AB - In early 2018, a reform of the world’s largest functioning greenhouse gas emissions cap-and-trade system, the EU Emissions Trading System (ETS), was formally approved. The reform changed the main principles of the system by endogenizing the emissions cap. We show that the emissions cap is now affected by the allowance demand and is therefore no longer set directly by EU policymakers. As a consequence, national policies that reduce allowance demand can now reduce long-run cumulative emissions, which is not possible in a standard cap-and-trade system. Using a newly developed dynamic model of the EU ETS, we show that policies that reduce allowance demand can have substantial effects on cumulative emissions after the reform. Model simulations also suggest that the reform reduces long-run cumulative emissions and, to a lesser extent, reduces emissions in the short run. Even so, the reform has a small short-run impact on the currently large allowance surplus.

KW - Faculty of Social Sciences

KW - Cap-and-trade system

KW - EU ETS

KW - Market Stability Reserve

KW - Overlapping policies

U2 - 10.1007/s10640-020-00518-w

DO - 10.1007/s10640-020-00518-w

M3 - Journal article

VL - 77

SP - 781

EP - 811

JO - Environmental and Resource Economics

JF - Environmental and Resource Economics

SN - 0924-6460

ER -

ID: 251308828