Download full text
(external source)
Citation Suggestion
Please use the following Persistent Identifier (PID) to cite this document:
https://doi.org/10.17645/pag.v10i1.4797
Exports for your reference manager
Beyond Control: Policy Incoherence of the EU Emissions Trading System
[journal article]
Abstract In this article, we explain why the current climate policy mix of the European Union (EU), consisting of the EU Emissions Trading System (ETS) and overlapping policies, is incoherent with respect to emission abatement and cost-effectiveness. The concept of policy coherence guides our analysis in ide... view more
In this article, we explain why the current climate policy mix of the European Union (EU), consisting of the EU Emissions Trading System (ETS) and overlapping policies, is incoherent with respect to emission abatement and cost-effectiveness. The concept of policy coherence guides our analysis in identifying the EU ETS’ current dynamic supply adjustment mechanism, the Market Stability Reserve (MSR), to be at the heart of the shortcomings of current market design. Incoherence emerges due to the MSR’s quantity-based indicator for scarcity. It only works well for current and past demand fluctuations, but not for anticipated changes in demand, e.g., caused by a member state’s fossil-fuel phase-out. As a result, instead of fostering synergies as intended, the MSR undermines coherence by creating backfiring interactions and making precise predictions of overlapping policies’ impacts close to impossible. Considering the European Commission’s reform proposal of July 2021, we argue that a change in the MSR’s parametrisation leaves the fundamental cause of incoherence unaddressed. Based on recent findings in the economics literature, we propose introducing a price-based indicator for scarcity as a solution to substantially reduce the current incoherence of the policy mix.... view less
Keywords
EU; climate policy; emissions trading
Classification
Special areas of Departmental Policy
Free Keywords
EU ETS; market stability reserve; overlapping policies; policy analysis; policy coherence
Document language
English
Publication Year
2022
Page/Pages
p. 256-264
Journal
Politics and Governance, 10 (2022) 1
Issue topic
Carbon Pricing Under Pressure: Withering Markets?
ISSN
2183-2463
Status
Published Version; peer reviewed