Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227511
Authors: 
Schmidt, Lukas
Year of Publication: 
2020
Series/Report no.: 
EWI Working Paper No. 20/07
Abstract: 
The latest reform of European Union Emission Trading System (EU ETS) enables overlapping policies, such as national coal phase-outs, to affect total emissions. For evaluatingoverlapping policies, this paper applies a detailed partial equilibrium model of the EU ETS.Under perfect foresight, overlapping policies decrease total emissions if implemented earlyon. Though, endogenous cancellation within the EU ETS mitigates the waterbed effecthardly by more than 50%. In contrast, overlapping policies mostly do not affect total emissions significantly or even increase them via the new green paradox effect if implementedlate and firms anticipate their long-term impact. If overlapping policies focus on low-costabatement options, they become more effective in mitigating the waterbed effect, with aneffectiveness of up to 60%. The effectiveness of overlapping policies decreases if firms aremyopic. Myopia also increases the danger of the new green paradox effect for early implemented overlapping policies. However, the absolute increase in total emissions via thenew green paradox remains below a third of today's yearly emissions if overlapping policiespermanently reduce allowance demand by 10%.
Subjects: 
Intertemporal Emission Trading
Overlapping Policies
EU ETS
New Green Paradox
Marginal Abatement Costs
Myopia
JEL: 
C61
H23
Q48
Q58
Document Type: 
Working Paper

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