N°671 / mars-avril 2024 – By Marc Baudry
The European Emissions Trading Scheme (EU-ETS) has had its ups and downs since its inception almost 20 years ago. It continues to attract criticism for failing to send a credible price signal to regulated companies that would help drive decarbonisation. This article examines that criticism in the light of a number of key points. In particular, it looks at the issues of over-allocation of allowances and carbon leakage. The analysis suggests that the difficulties facing the EU-ETS are not insurmountable but would require further reform of the scheme along the lines of what has already been done over the last two decades.
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Marc Baudry is a professor of economics at the University of Paris Nanterre, a member of the EconomiX laboratory, and the head of the “CO2 Price and Low-Carbon Innovation” division at the Climate Economics Chair. His work, published in international academic journals, intersects climate change economics with innovation and intellectual property economics. He is particularly interested in low-carbon innovation and technological change, as well as the economic policy instruments that can induce them.