Report

Pricing Carbon Effectively: Lessons from the European Emissions Trading System

Nov 2, 2018 | Dallas Burtraw, Michael Themann

Summary

EU climate policy shows success, but flaws remain that may affect the achievement of carbon pricing and long-term goals.

Key Findings

  • EU emissions have fallen sharply in industry and electricity sectors, although innovation has been only moderate.
  • The threat of competitive harm to European industry has thus far been overstated.
  • Persistently low carbon prices and incomplete coverage exclusion of the heat and mobile sectors undermines the influence of carbon pricing.
  • Recent reforms have stimulated prices substantially, but they remain uncertain in the long term.
  • A minimum carbon price would boost performance, stabilize expectations and avoid lock-in of carbon-intensive assets.