Emission Trading Beyond Europe: Linking Schemes in a Post-Kyoto World


Anger, Niels


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URL: http://ub-madoc.bib.uni-mannheim.de/1442
URN: urn:nbn:de:bsz:180-madoc-14423
Document Type: Working paper
Year of publication: 2006
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D61 H21 H22 Q58 ,
Subject headings (SWD): Europäische Union / Emissionshandelsrichtlinie , Umweltzertifikathandel , Kyoto-Protokoll , Clean Development Mechanism
Keywords (English): EU ETS , Emission Trading , Kyoto Protocol , Clean Development Mechanism
Abstract: This paper assesses the economic impacts of linking the EU Emission Trading Scheme (ETS) to emerging schemes beyond Europe, in the presence of a post-Kyoto agreement in 2020. Simulations with a numerical multi-country model of the world carbon market show that linking the European ETS induces only marginal economic benefits: As trading is restricted to energy-intensive industries that are assigned generous initial emissions, the major compliance burden is carried by non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, excluded sectors can however be substantially compensated by international trading at the country level, thus increasing the political attractiveness of the linking process. From an efficiency perspective, a desirable future climate policy regime represents a joint trading system that enables international emission trading between ETS companies and governments. While the Clean Development Mechanism (CDM) cannot alleviate the inefficiencies of linked ETS, in a parallel or joint trading regime the access to abatement options of developing countries induces large additional cost savings. Restricting CDM access via a supplementarity criterion does not significantly decrease the economic benefits from project-based emission crediting.
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Anger, Niels (2006) Emission Trading Beyond Europe: Linking Schemes in a Post-Kyoto World. Open Access [Working paper]
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