Emission trading beyond Europe: linking schemes in a post-Kyoto world

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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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 06-058

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Incidence ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Environmental Economics: Government Policy ; Allocative Efficiency; Cost-Benefit Analysis
• Subject: EU ETS ; Emission Trading ; Kyoto Protocol ; Clean Development Mechanism

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Anger, Niels
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/24513
• Last update: 10.03.2025, 11:42 AM CET