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The EU ETS and its companion policies : any insight for China's ETS?

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Verde, Galdi, Alloisio, Borghesi (2021) EDE - The EU ETS and Its Companion Policies. Any Insight for China's ETS.pdf (336.53 KB)
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https://hdl.handle.net/1814/70540
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10.1017/S1355770X20000595
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1355-770X; 1469-4395
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2021
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CoFoE; Climate; EU in the world
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Environment and development economics, 2021, Vol. 26, No. 3, pp. 302-320
[Florence School of Regulation]; [Climate]
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VERDE, Stefano F., GALDI, Giulio, ALLOISIO, Isabella, BORGHESI, Simone, The EU ETS and its companion policies : any insight for China’s ETS?, Environment and development economics, 2021, Vol. 26, No. 3, pp. 302-320, [Florence School of Regulation], [Climate] - https://hdl.handle.net/1814/70540
Abstract
This paper analyses the role that companion policies have had in the reduction of emissions regulated by the EU Emissions Trading System (EU ETS) and the related policy interactions, with a view to identifying relevant insights for China's forthcoming Emissions Trading System (ETS). The investigation rests on: (a) the observation of the EU's and China's ETSs and policy mixes; (b) economic theory concerning companion policies and ETS design; and (c) empirical ex-post evidence from the EU ETS. Three main conclusions emerge from the analysis. First, China's ETS, while not imposing a fixed cap on emissions, will not be immune to waterbed effects of companion policies. Second, the European experience stresses the importance of making explicit the objectives pursued by companion policies, and of balancing policies for innovation and policies for adoption of low-carbon technologies. Third, in the presence of a major market surplus, only permanent adjustments to allowance supply can be effective in raising prices.
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Cambridge University Press
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The work leading to this study was co-financed by the EU LIFE Programme of the European Commission – Grant Agreement LIFE15 GIC/IT/000051 LIFE SIDE.
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