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A Price Floor Solution to the Allowance Surplus in the EU ETS

Report
Authors Dallas Burtraw
Åsa Löfgren
Lars Zetterberg
Publication year 2013
Published at Department of Economics
Language en
Links www.economics.handels.gu.se/digital...
Keywords price floor, EU ETS, suprlus, climate change
Subject categories Economics

Abstract

Since 2008 there has been a rapid buildup of surplus emissions allowances in the EU ETS. The European Commission has presented six structural options to address the oversupply of allowances on a long-term basis. One option would introduce price management mechanisms, which could allow for the use of a price floor. A price floor has been mischaracterized as a tax, an instrument that has historically faced political opposition, and the commission states that an explicit carbon price objective would alter the nature of the EU ETS being a quantity-based market instrument. However, a price floor is structurally different from a tax in multiple ways, and its merits are well documented in the academic literature. This rule-based approach could reinforce the market-based philosophy and investment climate of the ETS.

Page Manager: Webmaster|Last update: 9/11/2012
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