EPRG 0632

Karsten Neuhoff, Markus Åhman, Regina Betz, Johanna Cludius, Federico Ferrario, Kristina Holmgren, Gabriella Pal, Michael Grubb, Felix Matthes, Karoline Rogge, Joachim Schleich, Jos Sijm, Andreas Tuerk, Claudia Kettner, Neil Walker

Implications of announced Phase 2 National Allocation Plans for the EU ETS

EPRG 0632 Non-Technical Summary | PDF

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  • Neuhoff, K., Åhman, M., Betz, R., Cludius, J., Ferrario, F., Holmgren, K., Pal, G., Grubb, M., Matthes, F., Rogge, K., Sato, M., Schleich, J., Sijm, J., Tuerk, A., Kettner, C. and Walker, N. (2006), “Implications of Announced Phase 2 National Allocation Plans for the EU ETS”, Climate Policy 6(4)

Abstract: We quantified the volume of free allowances that different National Allocation Plans proposed to allocate to existing and new installations, with specific reference to the power sector. Most countries continue to allocate based on historic emissions, contrary to hopes for improved allocation methods, with allocations to installations frequently based on 2005 emission data; this may strengthen belief in the private sector that emissions in the coming years will influence their subsequent allowance allocation. Allocations to new installations provide high and frequently fuel differentiated subsidies, risking significant distortions to investment choices. Thus in addition to being numerically weak in aggregate, proposed allocation plans reveal continuing if diverse problems, including perverse incentives. Ensuring the effectiveness of EU ETS in the coming years will require credible evidence to the private sector that free allowance allocation will be drastically reduced post-2012, or these problems otherwise addressed.

Keywords: Emission Trading, National Allocation Plans, Comparison, European Member states

 

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