17 Dec 2018

Five myths about an EU ETS carbon price floor

Milan Elkerbout

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This policy insight outlines different perspectives on the past performance of the EU Emissions Trading System (ETS) in terms of its allowance price, analyses how the recent reform responded to related challenges , and considers the case for introducing a carbon price floor in the EU ETS. The main part of the paper identifies five myths in the debate about an EU ETS price floor and critically challenges them. It concludes by discussing potential entry points for introducing a carbon price floor in the context of the upcoming EU climate policy process.

It builds on the workshop EU ETS Reform: Taking Stock and Examining Carbon Price Floor Options, held at CEPS in Brussels on July 3, 2018. The workshop was cosponsored by CEPS and the AHEAD and Mistra Carbon Exit projects. While the paper draws on insights from workshop discussions, its views are solely those of the authors.

Christian Flachsland is head of the working group Governance at MCC Berlin. Michael Pahle is head of the working group Energy Strategies Europe & Germany at the Potsdam Institute for Climate Impact Research (PIK). Dallas Burtraw is Darius Gaskins Senior Fellow at Resources for the Future (RFF). Ottmar Edenhofer is the director of the Mercator Research Institute on Global Commons and Climate Change (MCC). Milan Elkerbout is a Research Fellow at CEPS Energy Climate House. Carolyn Fischer is professor of environmental economics at the Vrije Universiteit Amsterdam (VU), School of Business and Economics, Department of Spatial Economics. Oliver Tietjen is a PhD student at the Potsdam Institute for Climate Impact Research (PIK). Lars Zetterberg is programme director of Mistra Carbon Exit; IVL Swedish Environmental Research Institute.

CEPS Policy Insights offer analyses of a wide range of key policy questions facing Europe. As an institution, CEPS takes no position on questions of European policy. Unless otherwise indicated, the views expressed are attributable only to the authors in a personal capacity and not to any institution with which they are associated.