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Abstract:

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CEP Policy Analysis
Still time to reclaim the European Union Emissions Trading System for the European tax payer
Ralf Martin, Mirabelle Muûls and Ulrich J. Wagner May 2010
Paper No' CEPPA010:
Full Paper (pdf)

Tags: climate change; eu ets; emissions; european union emissions trading system; carbon leakage;

The criteria proposed by the EU Commission to identify industries that will receive free emission permits in the third phase of the European Union Emissions Trading System (EU ETS) are not restrictive enough. Evidence from interviews with almost 800 managers in Europe shows that most of the sectors entitled to free emission permits are not facing an increased risk of closure or relocation outside of the EU as a consequence of permit auctioning. Free permit allocation is therefore just a transfer of tax payers' money to industry without any additional social benefit. We propose a simple modification of the Commission's criteria for free permit allocation which could save European tax payers at least 7 billion euros annually.