Title: US%20Participation,%20Permit%20Allocation%20and%20Hot%20Air%20Supply%20%20Gernot%20Klepper%20
1International Energy Workshop 22-24 June, Paris
The EU Emissions Trading Scheme
Efficient Climate Policy or a Danger for the
European Competitiveness?
Gernot Klepper Sonja Peterson Kiel Institute
for World Economics
2Motivation
- European Emissions Trading Scheme (ETS) is very
controversial - Proponents ETS contributes to meeting the
European Kyoto targets at minimal cost - Opponents ETS leads to negative competitiveness
effects - Speculations sprout about winners losers,
costs, sellers buyers and allowance prices - National Allocation Plans (NAPs) are crucial for
outcome
3Aim of the study
Use the DART Model to simulate the key features
and key impacts of the EU ETS by scanning the
range of likely allocation plans
4DART regions
- BEN Belgium, Luxemburg, Netherlands
- DEU Germany
- FRA France
- GBR Great Britain
- ITA Italy
- SCA Denmark, Finland, Sweden
- REU Austria, Ireland
- ACC Accession countries
- 7 other world regions
5DART sectors
- ETS
- OIL Refined oil products
- EGW Electricity
- IMS Iron, Metal,Steal (including Cement
Industry) - PPP Pulp Paper Products
- Non-ETS
- Energy COL, GAS, CRU
- Non-energy CEP, AGR, MOB, TRN, Y
6How to determine the overall amount of emissions
allocated to the ETS?
- Historical approach (HIS) multiply Kyoto target
with emission share of ETS sectors in some
historical year (e.g. 2000) - Forecasting approach (FUT) multiply Kyoto target
with emission share of ETS sectors in some future
year (e.g. 2012) - Least cost approach (LC) recognizes difference
in abatement costs - Allocation to ETS determines necessary
reductions in sectors outside the ETS!!
7DART Policy Scenarios
- Central Scenario ETS with EU25, no hot-air, LC
targets (determined from unilateral optimal
action) - Variation of NAPs HIS (emission shares from
2000) and FUT (emission shares from 2012) - Variation of role of accession countries HA
(full hot-air included), EU15 trading - Reference scenarios Kyoto targets with
- unilateral CO2 taxes (UNI)
- equalization of MAC across Europe (equiv. to
full EU emissions trading) (OPT) - Analyze outcome when ETS is in full force 2012
8Targets and BAU emissions in ETS sectors
9Allowances prices in 2012
10Emission weighted average tax rates outside the
ETS compared to the allowance price
11Allowance net imports in 2012
12Sectoral output losses in the EU relative to BAU
13Welfare losses in the EU
14Conclusion 1 Important role of the accession
countries
- they will be the only net sellers of allowances
even without hot-air included in the simulations - their participation in the ETS alone drives down
the costs of meeting the Kyoto targets
considerably - participation matters more then the inclusion of
hot-air
15Conclusion 2 Division of costs of reaching Kyoto
between ETS non-ETS sectors matters!
- Efficiency gains of the ETS depend on the NAPs
- If it is not based on abatement costs, but on
historical or expected emissions, the potential
efficiency gains trading can not be realized. - Least-cost allocation implies considerable
emission reductions in the ETS sectors. - Current NAPs are too generous to ETS sectors.
16Conclusion 3Competitiveness effects
- Not ETS imposes new restrictions but the Kyoto
targets itself - If designed correctly ETS is means to achieve
Kyoto targets at lower costs - Compared to unilateral action, all sectors gain
through trade - Competitiveness effects of ETS are overall quite
small
17Thank you for your attention!
18Welfare gains through emissions trading
19CO2 taxes under unilateral action