Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/24513
Authors: 
Anger, Niels
Year of Publication: 
2006
Series/Report no.: 
ZEW Discussion Papers 06-58
Abstract: 
This paper assesses the economic impacts of linking the EU Emission Trading Scheme (ETS) to emerging schemes beyond Europe, in the presence of a post-Kyoto agreement in 2020. Simulations with a numerical multi-country model of the world carbon market show that linking the European ETS induces only marginal economic benefits: As trading is restricted to energy-intensive industries that are assigned generous initial emissions, the major compliance burden is carried by non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, excluded sectors can however be substantially compensated by international trading at the country level, thus increasing the political attractiveness of the linking process. From an efficiency perspective, a desirable future climate policy regime represents a joint trading system that enables international emission trading between ETS companies and governments. While the Clean Development Mechanism (CDM) cannot alleviate the inefficiencies of linked ETS, in a parallel or joint trading regime the access to abatement options of developing countries induces large additional cost savings. Restricting CDM access via a supplementarity criterion does not significantly decrease the economic benefits from project-based emission crediting.
Subjects: 
EU ETS
Emission Trading
Kyoto Protocol
Clean Development Mechanism
JEL: 
H22
H21
Q58
D61
Document Type: 
Working Paper

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