Cross Border Trading and Borrowing in the EU ETS, by A. Denny Ellerman and Raphael Trotignon, Energy Journal, Volume 30, Special Issue #2, December 20091
This paper exploits a little used data resource within the central registry of the European Union’s Emissions Trading System (EU ETS) to analyze cross border trading and inter-year borrowing during the first trading period (2005- 2007). Cross-border flows were small in the aggregate but remarkably frequent in matching allowance deficits and surpluses at the installation level throughout the EU. These data also indicate that a novel feature of the EU ETS, the ability to borrow allowances from the forward allocation to satisfy current compliance requirements, was also used. These data provide evidence that the precondition of efficient abatement in a cap-and-trade system – widespread use of trading opportunities – was present in the first period of the EU ETS.
Keywords: EU ETS, Cross-border trade, Borrowing, CO2 emissions,