Abatement and Allocation in the Pilot Phase of the EU ETS
21 Pages Posted: 12 Jun 2009 Last revised: 4 Aug 2010
Date Written: June 22, 2010
Abstract
We use historical industrial emissions data to assess the level of abatement and overallocation that took place across European countries during the pilot phase (2005-2007) of the European Union Emission Trading Scheme. Using a dynamic panel data model, we estimate the counter factual (business-as-usual) emissions scenario for EU member states. Comparing this baseline to allocated and verified emissions, we find that both overallocation and abatement occurred, along with under-allocation and emissions inflation. Over the three trading years of the pilot phase we find over-allocation of approximately 280 million EUAs and total abatement of 247 Mt CO2. However, we calculate that emissions inflation of approximately 73 Mt CO2 also occurred, possibly due to uncertainty about future policy design features.
Keywords: Emissions Trading Scheme, Climate Policy, Dynamic Panel Data Analysis
JEL Classification: C23, O13, Q54, Q58
Suggested Citation: Suggested Citation
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