Is a market stability reserve likely to improve the functioning of the EU ETS? : evidence from a model comparison exercise

Neuhoff, Karsten; Acworth, William; Betz, Regina; Burtraw, Dallaw; Cludius, Johanna; Fell, Harrison; Hepbrun, Cameron; Holt, Charles; Jotzo, Frank; Kollenberg, Sascha; Landis, Florian; Slant, Stephen; Schopp, Anne; Shobe, William; Taschini, Luca; Trotignon, Raphael

Publication type:	Working paper – expertise – study
Title:	Is a market stability reserve likely to improve the functioning of the EU ETS? : evidence from a model comparison exercise
Authors:	Neuhoff, Karsten Acworth, William Betz, Regina Burtraw, Dallaw Cludius, Johanna Fell, Harrison Hepbrun, Cameron Holt, Charles Jotzo, Frank Kollenberg, Sascha Landis, Florian Slant, Stephen Schopp, Anne Shobe, William Taschini, Luca Trotignon, Raphael
Extent:	29
Issue Date:	2015
Publisher / Ed. Institution:	Deutsches Institut für Wirtschaftsforschung DIW
Publisher / Ed. Institution:	Berlin
Language:	English
Subject (DDC):	332: Financial economics
Abstract:	In January 2014 the European Commission proposed the introduction of a Market Stability Reserve (MSR) to improve the functioning of the European Union Emissions Trading System (EU ETS). According to the European Commission, the MSR is designed to adjust the EU ETS to supply-demand imbalances and protect the system from unexpected and sudden demand shocks and by doing so, ensure an efficient abatement pathway for the long-term decarbonisation of the European economy (European Commission, 2014). We explore what market and regulatory failures could inhibit the functioning of the EU ETS and result in deviations from the efficient abatement pathway. Different research teams explore the implications of potential market and regulatory failures and/or inefficient responses to incomplete or complex information. Simulation models show that each of these factors can result in deviations from the efficient abatement pathway, and that an MSR can restore some of the lost efficiency. In considering MSR designs, an Early Start MSR (2017) with the back-loaded allowances placed directly into the reserve is shown to improve the performance compared to an MSR implemented in 2021. Laboratory experiments with human subjects show the importance of the quantity trigger levels and point to the importance of review provisions for adjustments in the early 2020ss to ensure private banking requirementscan be met.
URI:	https://climatestrategies.org/wp-content/uploads/2015/02/Climate-Strategies-MSR-Report-Final1.pdf https://digitalcollection.zhaw.ch/handle/11475/15199
License (according to publishing contract):	Licence according to publishing contract
Departement:	School of Management and Law
Organisational Unit:	Center for Energy and Environment (CEE)
Appears in collections:	Publikationen School of Management and Law

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Neuhoff, K., Acworth, W., Betz, R., Burtraw, D., Cludius, J., Fell, H., Hepbrun, C., Holt, C., Jotzo, F., Kollenberg, S., Landis, F., Slant, S., Schopp, A., Shobe, W., Taschini, L., & Trotignon, R. (2015). Is a market stability reserve likely to improve the functioning of the EU ETS? : evidence from a model comparison exercise. Deutsches Institut für Wirtschaftsforschung DIW. https://climatestrategies.org/wp-content/uploads/2015/02/Climate-Strategies-MSR-Report-Final1.pdf

Neuhoff, K. et al. (2015) Is a market stability reserve likely to improve the functioning of the EU ETS? : evidence from a model comparison exercise. Berlin: Deutsches Institut für Wirtschaftsforschung DIW. Available at: https://climatestrategies.org/wp-content/uploads/2015/02/Climate-Strategies-MSR-Report-Final1.pdf.

K. Neuhoff et al., “Is a market stability reserve likely to improve the functioning of the EU ETS? : evidence from a model comparison exercise,” Deutsches Institut für Wirtschaftsforschung DIW, Berlin, 2015. [Online]. Available: https://climatestrategies.org/wp-content/uploads/2015/02/Climate-Strategies-MSR-Report-Final1.pdf

NEUHOFF, Karsten, William ACWORTH, Regina BETZ, Dallaw BURTRAW, Johanna CLUDIUS, Harrison FELL, Cameron HEPBRUN, Charles HOLT, Frank JOTZO, Sascha KOLLENBERG, Florian LANDIS, Stephen SLANT, Anne SCHOPP, William SHOBE, Luca TASCHINI und Raphael TROTIGNON, 2015. Is a market stability reserve likely to improve the functioning of the EU ETS? : evidence from a model comparison exercise [online]. Berlin: Deutsches Institut für Wirtschaftsforschung DIW. Verfügbar unter: https://climatestrategies.org/wp-content/uploads/2015/02/Climate-Strategies-MSR-Report-Final1.pdf

Neuhoff, Karsten, William Acworth, Regina Betz, Dallaw Burtraw, Johanna Cludius, Harrison Fell, Cameron Hepbrun, et al. 2015. “Is a Market Stability Reserve Likely to Improve the Functioning of the EU ETS? : Evidence from a Model Comparison Exercise.” Berlin: Deutsches Institut für Wirtschaftsforschung DIW. https://climatestrategies.org/wp-content/uploads/2015/02/Climate-Strategies-MSR-Report-Final1.pdf.

Neuhoff, Karsten, et al. Is a Market Stability Reserve Likely to Improve the Functioning of the EU ETS? : Evidence from a Model Comparison Exercise. Deutsches Institut für Wirtschaftsforschung DIW, 2015, https://climatestrategies.org/wp-content/uploads/2015/02/Climate-Strategies-MSR-Report-Final1.pdf.