Pricing Carbon Effectively: Lessons from the European Emissions Trading System
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.
