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dc.contributor.authorGerlagh, Reyer
dc.contributor.authorHeijmans, Roweno
dc.contributor.authorRosendahl, Knut Einar
dc.date.accessioned2022-04-11T11:19:45Z
dc.date.available2022-04-11T11:19:45Z
dc.date.created2022-01-05T14:08:41Z
dc.date.issued2021
dc.identifier.citationEconomic Policy. 2021, 36(107), 485-522.en_US
dc.identifier.issn0266-4658
dc.identifier.urihttps://hdl.handle.net/11250/2990910
dc.description.abstractThe European Union’s Emissions Trading System (EU ETS) is complemented by a Market Stability Reserve (MSR). After a major revision of the EU ETS in 2018, the MSR effectively makes the supply of allowances responsive to demand. In this paper, we show that a cap-and-trade scheme with an endogenous cap, such as the EU ETS produces a green paradox. Abatement policies announced early but realized in the future are counter-effective because of the MSR, they increase cumulative emissions. We present the mechanisms in a two-period model, and then provide quantitative evidence of our result for an annual model disciplined on the price rise in the EU ETS that followed the introduction of the MSR. Our results point to the need for better coordination between different policies, such as the “European Green Deal.” We conclude with suggestions to improve the workings of an endogenous cap, ahead of the MSR review scheduled for 2021.en_US
dc.language.isoengen_US
dc.titleAn Endogenous Emission Cap Produces a Green Paradoxen_US
dc.typeJournal articleen_US
dc.typePeer revieweden_US
dc.description.versionpublishedVersionen_US
dc.source.pagenumber485-522en_US
dc.source.volume36en_US
dc.source.journalEconomic Policyen_US
dc.identifier.doi10.1093/epolic/eiab011
dc.identifier.cristin1975244
dc.relation.projectNorges forskningsråd: 209698en_US
dc.relation.projectNorges forskningsråd: 280987en_US
cristin.ispublishedtrue
cristin.fulltextpostprint
cristin.fulltextoriginal
cristin.qualitycode1


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