A Ten-Year Rule to guide the allocation of EU emission allowances |
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Authors: | Markus Å hman,Dallas Burtraw,Joseph Kruger,Lars Zetterberg |
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Affiliation: | 1. IVL Swedish Environmental Research Institute, Box 210 60, SE-100 31 Stockholm, Sweden;2. Resources For the Future, 1616 P Street NW, Washington DC 20036, USA;3. National Commission on Energy Policy, 1616H Street NW, Washington DC 20006, USA |
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Abstract: | Member States in the European Union (EU) are responsible for National Allocation Plans governing the initial distribution of emission allowances in the CO2 Emission Trading System, including rules governing allocations to installations that close and to new entrants. The European Commission has provided guidelines to discourage the use of allocation methodologies that provide incentives affecting firms’ compliance behavior, for example by rewarding one type of compliance investment over another. We find that the treatment of closures and new entrants by Member States is inconsistent with the general guidelines provided by the EU. We propose stronger EU guidance regarding closures and new entrants, a more precise compensation criterion on which to justify free allocations, and a Ten-Year Rule as a component of future EU policy that can guide a transition from current practice to an approach that places greater weight on efficiency. |
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Keywords: | Emission trading Closures New entrants |
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