Ralf Martin, Mirabelle Mûuls, and Ulrich J. Wagner
- Published in print:
- 2015
- Published Online:
- January 2016
- ISBN:
- 9780262029285
- eISBN:
- 9780262330435
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262029285.003.0009
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Based on interviews with 429 manufacturing firms in six European countries, this chapter analyzes the rationality of trading behavior in the EU ETS. The majority of firms does not trade on the EU ...
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Based on interviews with 429 manufacturing firms in six European countries, this chapter analyzes the rationality of trading behavior in the EU ETS. The majority of firms does not trade on the EU allowance market although most firms have excess permits which they choose to bank. Similarly, the majority of installations that are part of a larger firm manage compliance within their own installation despite having the option to pool permits within firms. About 30% of firms do not appreciate the market created by the EU ETS; i.e. they do not consider carbon allowances as a financial asset that could provide profit opportunities. In the same vein, some firms do not make their allowances available despite possessing an excess supply: on average firms start to sell only if their excess supply is larger than 5,000 allowances. However, the total number of excess allowances held by firms below the trading threshold is rather small, at less than 10% of all excess allowances.Less
Based on interviews with 429 manufacturing firms in six European countries, this chapter analyzes the rationality of trading behavior in the EU ETS. The majority of firms does not trade on the EU allowance market although most firms have excess permits which they choose to bank. Similarly, the majority of installations that are part of a larger firm manage compliance within their own installation despite having the option to pool permits within firms. About 30% of firms do not appreciate the market created by the EU ETS; i.e. they do not consider carbon allowances as a financial asset that could provide profit opportunities. In the same vein, some firms do not make their allowances available despite possessing an excess supply: on average firms start to sell only if their excess supply is larger than 5,000 allowances. However, the total number of excess allowances held by firms below the trading threshold is rather small, at less than 10% of all excess allowances.
Marc Gronwald and Beat Hintermann (eds)
- Published in print:
- 2015
- Published Online:
- January 2016
- ISBN:
- 9780262029285
- eISBN:
- 9780262330435
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262029285.001.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This book is the result of a workshop about emission permit markets in Venice, organized by the editors in collaboration with CESifo. The individual contributions were written independently of each ...
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This book is the result of a workshop about emission permit markets in Venice, organized by the editors in collaboration with CESifo. The individual contributions were written independently of each other and differ in topic and methodology, yet they share the underlying theme of theoretical and empirical research in emission permit markets. The chapters are grouped into four thematic sections: A discussion of the development of the EU ETS since its beginning to the present; political economy considerations; interactions with parallel instruments for climate policy; and firm behavior in this new market. Although all contributions are economic in nature, they depart from rigorous assumptions often encountered in economics research, or examine to what extent market participants’ action can in fact be explained by neoclassical theory. The overall findings are that the market appears to work in the sense that there is a single price for allowances, and that emissions have been kept below the cap. However, several chapters show that the market is not fully efficient due to reasons such as rent seeking, transactions costs, limited information, regulatory uncertainty, over-allocation and interactions with other climate instruments. Some of these problems have been addressed by the European Commission in the context of rule changes for Phase 3, whereas others have been mitigated by learning on behalf of market participants. Overall, we view the EU ETS as a successful implementation of market-based environmental policy. However, in order to improve the ecological efficiency of the scheme, the future emissions cap should be decreased.Less
This book is the result of a workshop about emission permit markets in Venice, organized by the editors in collaboration with CESifo. The individual contributions were written independently of each other and differ in topic and methodology, yet they share the underlying theme of theoretical and empirical research in emission permit markets. The chapters are grouped into four thematic sections: A discussion of the development of the EU ETS since its beginning to the present; political economy considerations; interactions with parallel instruments for climate policy; and firm behavior in this new market. Although all contributions are economic in nature, they depart from rigorous assumptions often encountered in economics research, or examine to what extent market participants’ action can in fact be explained by neoclassical theory. The overall findings are that the market appears to work in the sense that there is a single price for allowances, and that emissions have been kept below the cap. However, several chapters show that the market is not fully efficient due to reasons such as rent seeking, transactions costs, limited information, regulatory uncertainty, over-allocation and interactions with other climate instruments. Some of these problems have been addressed by the European Commission in the context of rule changes for Phase 3, whereas others have been mitigated by learning on behalf of market participants. Overall, we view the EU ETS as a successful implementation of market-based environmental policy. However, in order to improve the ecological efficiency of the scheme, the future emissions cap should be decreased.
Marc Gronwald and Beat Hintermann
- Published in print:
- 2015
- Published Online:
- January 2016
- ISBN:
- 9780262029285
- eISBN:
- 9780262330435
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262029285.003.0012
- Subject:
- Economics and Finance, Development, Growth, and Environmental
In this introductory chapter, we describe the goals of the workshop in Venice that has led to this collection of essays and give a brief overview over the individual chapters in this book. We divide ...
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In this introductory chapter, we describe the goals of the workshop in Venice that has led to this collection of essays and give a brief overview over the individual chapters in this book. We divide them into four different thematic sections that focus, respectively, on the current state and the development of the EU ETS (Section I); aspects related to political economy in the sense that firms aim to influence climate regulation (Section II); interactions with parallel instruments of climate policy (Section III); and firm behavior in the emissions market (Section IV). We provide some general and mostly positive conclusions about the EU ETS as a policy experiment, but argue that in order for it to provide a significant contribution to combatting climate change, the future cap should be tightened.Less
In this introductory chapter, we describe the goals of the workshop in Venice that has led to this collection of essays and give a brief overview over the individual chapters in this book. We divide them into four different thematic sections that focus, respectively, on the current state and the development of the EU ETS (Section I); aspects related to political economy in the sense that firms aim to influence climate regulation (Section II); interactions with parallel instruments of climate policy (Section III); and firm behavior in the emissions market (Section IV). We provide some general and mostly positive conclusions about the EU ETS as a policy experiment, but argue that in order for it to provide a significant contribution to combatting climate change, the future cap should be tightened.
Beat Hintermann and Marc Gronwald
- Published in print:
- 2015
- Published Online:
- January 2016
- ISBN:
- 9780262029285
- eISBN:
- 9780262330435
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262029285.003.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter provides a brief overview of the EU ETS. It outlines the design and scope of this market, presents data on aggregate allocation as well as emissions, and summarizes the development of ...
More
This chapter provides a brief overview of the EU ETS. It outlines the design and scope of this market, presents data on aggregate allocation as well as emissions, and summarizes the development of allowance prices between 2005 and today.Less
This chapter provides a brief overview of the EU ETS. It outlines the design and scope of this market, presents data on aggregate allocation as well as emissions, and summarizes the development of allowance prices between 2005 and today.
