The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading Systems
The EU has established the world’s first cross-border emission-trading systems (ETS) for greenhouse gas (GHG) emissions, currently covering aviation, emission-intensive sectors, and electricity (EITE). The EU Commission has offered to apply emissions trading in new sectors where emissions from marit...
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| Format: | Article |
| Language: | English |
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Elsevier
2022-05-01
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| Series: | Journal of Open Innovation: Technology, Market and Complexity |
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| Online Access: | https://www.mdpi.com/2199-8531/8/2/91 |
| _version_ | 1797428241599823872 |
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| author | Mohammad M. Khabbazan |
| author_facet | Mohammad M. Khabbazan |
| author_sort | Mohammad M. Khabbazan |
| collection | DOAJ |
| description | The EU has established the world’s first cross-border emission-trading systems (ETS) for greenhouse gas (GHG) emissions, currently covering aviation, emission-intensive sectors, and electricity (EITE). The EU Commission has offered to apply emissions trading in new sectors where emissions from maritime transport will be incorporated into the current EU ETS, while a separated emissions trading system will cover emissions from road transport and the building sector. This paper employs a multi-regional multi-sectoral computable general equilibrium (CGE) model with two simultaneous international emission permit markets. After examining the abatement costs for the EU regions, various policy scenarios are implemented to study the welfare effects of forming an ETS covering the sectors other than EITE (NEIT) and its linking with the EITE sectors under two different baselines and four emission reduction targets. The results provide several important insights: (i) Marginal abatement costs in Germany and the Eastern European Union region (EEU) are significantly lower than in the rest of the EU regions. (ii) The carbon price in the emission permit market covering NEIT is significantly higher than the carbon price in the emission permit market covering EITE. (iii) Germany and EEU appear as notable suppliers of emission permits in both markets. (iv) There is a significant aggregate welfare gain under the scenario in which the ETS covering NEIT co-exists parallel with the ETS covering EITE. (v) The aggregate welfare in the EU under the full integration of EITE and NEIT may fall below its value under the scenario with two parallel emission permit markets. |
| first_indexed | 2024-03-09T08:55:13Z |
| format | Article |
| id | doaj.art-7842f84e0b2447d78872ef63d7a0ad13 |
| institution | Directory Open Access Journal |
| issn | 2199-8531 |
| language | English |
| last_indexed | 2024-03-09T08:55:13Z |
| publishDate | 2022-05-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Journal of Open Innovation: Technology, Market and Complexity |
| spelling | doaj.art-7842f84e0b2447d78872ef63d7a0ad132023-12-02T13:18:12ZengElsevierJournal of Open Innovation: Technology, Market and Complexity2199-85312022-05-018919110.3390/joitmc8020091The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading SystemsMohammad M. Khabbazan0Workgroup for Economic and Infrastructure Policy (WIP), Technical University of Berlin (TU Berlin), Strasse des 17. Juni 135, 10623 Berlin, GermanyThe EU has established the world’s first cross-border emission-trading systems (ETS) for greenhouse gas (GHG) emissions, currently covering aviation, emission-intensive sectors, and electricity (EITE). The EU Commission has offered to apply emissions trading in new sectors where emissions from maritime transport will be incorporated into the current EU ETS, while a separated emissions trading system will cover emissions from road transport and the building sector. This paper employs a multi-regional multi-sectoral computable general equilibrium (CGE) model with two simultaneous international emission permit markets. After examining the abatement costs for the EU regions, various policy scenarios are implemented to study the welfare effects of forming an ETS covering the sectors other than EITE (NEIT) and its linking with the EITE sectors under two different baselines and four emission reduction targets. The results provide several important insights: (i) Marginal abatement costs in Germany and the Eastern European Union region (EEU) are significantly lower than in the rest of the EU regions. (ii) The carbon price in the emission permit market covering NEIT is significantly higher than the carbon price in the emission permit market covering EITE. (iii) Germany and EEU appear as notable suppliers of emission permits in both markets. (iv) There is a significant aggregate welfare gain under the scenario in which the ETS covering NEIT co-exists parallel with the ETS covering EITE. (v) The aggregate welfare in the EU under the full integration of EITE and NEIT may fall below its value under the scenario with two parallel emission permit markets.https://www.mdpi.com/2199-8531/8/2/91carbon pricingclimate mitigationclimate policycomputable general equilibriumemissions tradingEuropean Union |
| spellingShingle | Mohammad M. Khabbazan The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading Systems Journal of Open Innovation: Technology, Market and Complexity carbon pricing climate mitigation climate policy computable general equilibrium emissions trading European Union |
| title | The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading Systems |
| title_full | The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading Systems |
| title_fullStr | The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading Systems |
| title_full_unstemmed | The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading Systems |
| title_short | The EU’s Gain (Loss) from More Emission Trading Flexibility—A CGE Analysis with Parallel Emission Trading Systems |
| title_sort | eu s gain loss from more emission trading flexibility a cge analysis with parallel emission trading systems |
| topic | carbon pricing climate mitigation climate policy computable general equilibrium emissions trading European Union |
| url | https://www.mdpi.com/2199-8531/8/2/91 |
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