COVID-19, Green Deal and recovery plan permanently change emissions and prices in EU ETS Phase IV.
Where this comes from
- Record sourced from PubMed, PMID 35246534.
- Also identified by DOI 10.1038/s41467-022-28398-2 and PMC identifier 8897504.
- Licence recorded as CC BY.
- The licence permits redistribution, so the abstract is shown in full and the full text is available from the publisher.
Abstract
The EU emissions trading system's (ETS) invalidation rule implies that shocks and overlapping policies can change cumulative carbon emissions. This paper explains these mechanisms and simulates the effect of COVID-19, the European Green Deal, and the recovery stimulus package on cumulative EU ETS emissions and allowance prices. Our results indicate that the negative demand shock of the pandemic should have a limited effect on allowance prices and rather translates into lower cumulative carbon emissions. Aligning EU ETS with the 2030 reduction target of -55% might increase allowance prices to 45-94 €/ton CO<sub>2</sub> today and reduce cumulative carbon emissions to 14.2-18.3 GtCO<sub>2</sub> compared to 23.5-33.1 GtCO<sub>2</sub> under a -40% 2030 reduction target. Our results crucially depend on when the waterbed will be sealed again, which is an endogenous market outcome, driven by the EU ETS design, shocks and overlapping climate policies such as the recovery plan.
Medical subject headings
- Air Pollutants
- Air Pollution
- COVID-19
- Carbon
- Carbon Dioxide
- Conservation of Energy Resources