Abstract
Admitting banking in emissions trading systems reduces overall compliance costs by allowing for intertemporal flexibility: cost savings can be traded over time. However most, EU Member States prohibit the transfer of unused allowances from the period of 2005–2007 into the first commitment period under the Kyoto Protocol, i.e. 2008–2012. At the same time, allowances appear to be allocated fairly generously to the emissions trading sector. In this paper, we first explore the implications of such a ban on banking when initial emission targets are lenient. This analysis is based on a simulation which was recently carried out in Germany with companies and with a student control group. The findings suggest that an EU-wide ban on banking would lead to efficiency losses in addition to those losses which arise from the lack of intertemporal flexibility.
This paper is a shorter and slightly modified version of Schleich et al. (2006).
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Schleich, J., Ehrhart, KM., Hoppe, C., Seifert, S. (2006). Generous allocation and a ban on banking — implications of a simulation game for EU emissions trading. In: Antes, R., Hansjürgens, B., Letmathe, P. (eds) Emissions Trading and Business. Physica-Verlag HD. https://doi.org/10.1007/3-7908-1748-1_3
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DOI: https://doi.org/10.1007/3-7908-1748-1_3
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