Second thoughts after the second trading period of EU ETS
12:00 - 13:00
The EU Emissions ‘Trading System (EU) was intended as the flagship of EU energy and environmental policy. After the introduction in 2005 and two trading periods the market for carbon allowances is on the verge of breaking down. We present an extensive data analysis of the more than 11.000 installations for obtaining evidence about the substantial differences in the performance over countries and sectors. We identify reasons why the cap and trade mechanism may have been built on too weak conceptual foundations and why the mechanism design of the allocation procedure was flawed. Finally we argue that the current proposals for a reform are not sufficient and a fundamental structural re-design is recommended for which we put forward suggestions for incentive compatible mechanism designs.