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ECN publication
Title:
EU ETS Allocation: evaluation of present system and options beyond 2012
 
Author(s):
Sijm, J.P.M.
 
Published by: Publication date:
ECN Policy Studies 30-12-2006
 
ECN report number: Document type:
ECN-W--07-007 Article (scientific)
 
Number of pages:
7  

Published in: Zeitschrift für Energiewirtschaft (GWV Media), , 2006, Vol.30, 4, p.285-292.

Abstract:
The main purposes of this paper are (i) to evaluate briefly the present EU ETS allocation system up to 2012 and,subsequently (ii) to discuss shortly the pros and cons of allocation options for the period beyond 2012, including different allocation decision levels (national versus EU-wide) and different allocation methods (i.e. grandfathering, benchmarking or auctioning). The present system is primarily characterised by decision-making at the national level and free allocation of emission allowances based on grandfathering and benchmarking, resulting in a complex diversity of allocation rules and adverse effects on efficiency, equity and investments in carbon abatement technologies.The paper concludes that harmonization or centralization of allocation decision-making at the EU level may address some adverse effects of the present allocation system. However, MS governments are likely to be rather reluctant to transfer a major part of their allocation decision competence to the EC level as allocation decisions may have significant distributional and competitive effects at the national, sectoral and firm levels. Moreover, assuming a global climate policy regime is still lacking in 2013, a differentiation of allocation methods could be considered, including (i) auctioning for sheltered sectors, (ii) grand-fathering for incumbents in exposed sectors, (iii) generic benchmarking for newcomers in exposed sectors, and (iv) recycling of auction revenues. Once a global climate policy regime is introduced, auctioning can be applied to all ETS participants while the auction revenues can be used to finance general socioeconomic purposes, including the promotion of low-cost technologies for carbon saving and storage.


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