Installation Entries and Exits in the EU ETS Industrial Sector

31 Pages Posted: 1 Apr 2016

See all articles by Stefano F. Verde

Stefano F. Verde

European University Institute

Christoph Graf

Stanford University - Department of Economics

Thijs Jong

affiliation not provided to SSRN

Claudio Marcantonini

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Date Written: March 2016

Abstract

Focusing on the industrial sector of the EU ETS, this study identifies and analyses the entries and the exits of installations into and from the system over the period 2005-2013. The overall number of exits was notable relative to the number of installations, and significantly greater than that of the entries. Further, we estimate a hazard model for the risk of an installation exiting the EU ETS, which identifies a number of different factors referring to the installation, the firm, and the economy, explaining the occurrence of this event. In addition to these, an “end-of-phase effect” is found, whereby the chances of exit were significantly higher in the final years of the EU ETS Phases I and II. This effect, related to the rules concerning the closure of an installation and the withdrawal of the relative allowances, is detrimental to the allocative efficiency of the system and, therefore, to its cost-effectiveness in emissions abatement. The evidence provided by the study and some of its methodological aspects may be useful for future attempts to identify investment leakage in the EU ETS.

Keywords: EU ETS, entries and exits, manufacturing sector, hazard model, end-of-phase effect

Suggested Citation

Verde, Stefano F. and Graf, Christoph and Jong, Thijs and Marcantonini, Claudio, Installation Entries and Exits in the EU ETS Industrial Sector (March 2016). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2016/19, Available at SSRN: https://ssrn.com/abstract=2757563 or http://dx.doi.org/10.2139/ssrn.2757563

Stefano F. Verde (Contact Author)

European University Institute ( email )

Fiesole, Tuscany
Italy

Christoph Graf

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
STANFORD, CA 94305-6072
United States

Thijs Jong

affiliation not provided to SSRN

Claudio Marcantonini

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

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