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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