Abstract
Prices for emission allowances in Europe’s Emissions Trading System (ETS) have remained low for many years. This has given rise to controversies on whether there is a need for a fundamental reform of the ETS. Potential reform proposals include the introduction of a price fl oor for certifi cates and a market stability reserve, which is a rule-based mechanism for steering the market volume of allowances and is the preferred approach of the European Commission. In this article, we instead recommend retaining the ETS and suggest correcting past mistakes by a single intervention.
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We thank Christoph M. Schmidt and Colin Vance for valuable suggestions and the Federal Ministry of Education and Research (BMBF) for fi nancial support under grant 01LA1113A. This work has also been supported by the Collaborative Research Center “Statistical Modeling of Nonlinear Dynamic Processes” (SFB 823) of the German Research Foundation (DFG), within the framework of Project A3, “Dynamic Technology Modeling”.
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Andor, M.A., Frondel, M. & Sommer, S. Reforming the EU Emissions Trading System: An Alternative to the Market Stability Reserve. Intereconomics 51, 87–93 (2016). https://doi.org/10.1007/s10272-016-0582-2
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DOI: https://doi.org/10.1007/s10272-016-0582-2