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- Fischer, Carolyn, et al.
(författare)
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The Legal and Economic Case for an Auction Reserve Price in the EU Emissions Trading System
- 2020
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Ingår i: The Columbia journal of European law. - 1076-6715. ; 26:2, s. 1-28
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Tidskriftsartikel (refereegranskat)abstract
- When it first launched in 2005, the European Union emissions trading system (EU ETS) expected to see carbon dioxide prices of around €30/ton and be a cornerstone of the EU's climate policy. The reality was a cascade of falling prices, a ballooning privately held emissions bank, and a decade of muted incentives for investment in the technology and innovation necessary to achieve long-term climate goals. The European Commission responded with various administrative measures, including postponing the introduction of allowances (“backloading”) and using a quantity-based criterion for regulating future allowance sales (“the market stability reserve”). While prices have now begun to recover, it is far from clear whether these measures are sufficient to adequately support the price of carbon dioxide into the future. In the meantime, governments outside the EU ETS have begun turning away from carbon pricing and adopting overlapping regulatory measures that reinforce low prices. Unfortunately, however, this further undermines confidence in market-based mechanisms for reducing greenhouse gas emissions. Other carbon markets have responded to such by introducing an auction reserve price that sets a minimum price in allowance auctions, thus avoiding the unexpectedly low price outcomes experienced in the EU ETS. Opponents of instituting such an auction reserve price in the EU ETS express two main concerns. First, they fear that a minimum auction price would interfere with the quantity-based nature of the market. Second, they argue that a reserve price would be tantamount to a tax, thus triggering a burdensome decision rule requiring unanimity among EU Member States that would be difficult to overcome. This Article reviews the economic and legal arguments for and against an auction reserve price. Our economic analysis concludes that an auction reserve price is necessary to accommodate overlapping policies and for the allowance market to operate efficiently. Our legal analysis concludes that, inasmuch as an auction reserve price is not a “provision primarily of a fiscal nature,” nor would it “significantly affect a Member State's choice between different energy sources,” no legal barriers stand in the way of the introduction of an auction reserve price into the EU ETS. We then describe two ways by which a reserve price could be introduced into this system.
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| 4. |
- Zetterberg, Lars, et al.
(författare)
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Short-Run Allocation of Emissions Allowances and Long-Term Goals for Climate Policy
- 2012
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Ingår i: Ambio: a Journal of Human Environment. - : Springer Science and Business Media LLC. - 0044-7447. ; 41:supplement 1, s. 23-32
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Tidskriftsartikel (refereegranskat)abstract
- We use economic analysis to evaluate grandfathering, auctioning, and benchmarking approaches for allocation of emissions allowances and then discuss practical experience from European and American schemes. In principle, auctions are superior from the viewpoints of efficiency, fairness, transparency, and simplicity. In practice, auctions have been opposed by important sectors of industry, which argue that carbon pricing without compensation would harm international competitiveness. In the European Union’s Emissions Trading System, this concern led to grandfathering that is updated at various intervals. Unfortunately, updating gives industry an incentive to change behavior to influence future allocation. Furthermore, the wealth transferred to incumbent firms can be significantly larger than the extra costs incurred, leading to windfall profits. Meanwhile, potential auction revenues are not available to reduce other taxes. By circumscribing free allocation, benchmarking can target competitiveness concerns, incur less wealth transfer, and provide a strategy consistent with transitioning to auctions in the long run.
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