Linking emissions trading systems with different price control mechanisms
Policy Briefs, 2020/41, Florence School of Regulation, Climate, LIFE DICET Project
GALDI, Giulio, VERDE, Stefano F., BORGHESI, Simone, FERRARI, Albert, Linking emissions trading systems with different price control mechanisms, Policy Briefs, 2020/41, Florence School of Regulation, Climate, LIFE DICET Project - https://hdl.handle.net/1814/69143
Retrieved from Cadmus, EUI Research Repository
Most existing Emissions Trading Systems (ETSs) include their own specific Price Control Mechanism (PCM): a design feature which steers the allowance price into a desired range. Divergences along five key dimensions of PCMs may impact linking between ETSs in several ways, positive or negative. Restricted linking, e.g. exchange ratios or import quotas on allowances, could mitigate adverse effects of PCM differences between prospective partners. Convergence towards soft and price-based PCMs is both desirable and likely difficult to accomplish. PCMs may increase allocative efficiency if they make the allowance supply more responsive to shocks. The most effective way to reduce long term price uncertainty remains creating an environmentally ambitious climate policy framework.
Cadmus permanent link: https://hdl.handle.net/1814/69143
Full-text via DOI: 10.2870/34508
Series/Number: Policy Briefs; 2020/41; Florence School of Regulation; Climate; LIFE DICET Project
Publisher: European University Institute
Sponsorship and Funder information:
The LIFE DICET project (lifedicetproject.eui.eu) is co-financed by the LIFE Programme of the European Union (EU). The policy brief reflects the authors’ views and the European Commission is not responsible for any use that may be made of the information this policy brief contains.