Claudio Marcantonini

The European Union Emissions Trading System: Ten Years and Counting

This article provides an introduction to the European Union (EU) Emissions Trading System (ETS). First we describe the legislative development of the EU ETS, its evolution from free allocation to auctioning and centralized allocation rules, its relationship to the Kyoto Protocol and other trading systems, and its relationship to other EU climate and energy policies. This is followed by an assessment of the performance of the EU ETS, which focuses in particular on emissions, allowance prices, and the use of offsets. We conclude with a discussion of the current debate about the future of the EU ETS and proposals for changes to both the EU ETS and the climate policy environment in which it operates. ( JEL: Q54, Q58)

The cost of abating CO2 emissions by renewable energy incentives in Germany

Incentives for the development of renewable energy have increasingly become an instrument of climate policy, that is, as a means to reduce GHG emissions. This research analyzes the German experience in promoting renewable energy over the past decade to identify the ex post cost of reducing CO2 emissions through the promotion of renewable energy, specifically, wind and solar. To this propose, we calculated the annual CO2 abatement cost for the years 2006-2010 as the ratio of the net cost over the CO2 emission reductions resulting from the use of renewable energy. The net cost is the sum of the costs and cost savings due to the injection of renewable energy into the electric power system. Results show that CO2 abatement cost of wind are relatively low, of the order of tens of Euro per tonne of CO2, while CO2 abatement cost of solar are very high, of the order of hundreds of Euro per tonne of CO2. CO2 abatement cost has changed considerably over the years due to variations of fossil fuels prices, carbon price and the amount of generated renewable energy.

Renewable Energy Incentives and CO2 Abatement in Italy

In order to combat global warming, Italy has committed to clear environmental goals by reducing its CO2 emissions. To this purpose, it has notably encouraged renewable energy development through a variety of support schemes, ranging from green certificates to feed-in and premium tariffs. As a result, during the last years, the production of electricity from renewable energy sources, especially from wind and solar energy, has experienced a considerable surge. In this paper we estimate the cost of reducing CO2 emissions in the power sector by deploying wind and solar energy in Italy from 2008 to 2011. The results show that, for the period analyzed, the average costs for wind are in the order of 150 €/tCO2, while for solar are much higher, above 1000 €/tCO2. This is because solar energy generators receive much higher remunerations per MWh of generated electricity than wind energy generators. These costs are about twice as high as in Germany. This is due to the difference between the incentive schemes and the power system in the two countries.

The EU ETS: The first eight years

The European Unions Emissions Trading System (EU ETS) is the largest cap-and-trade program yet implemented which, in 2013, entered its ninth year of existence. During these eight years the EU ETS has seen a number of significant changes based on a succession of landmark legislative achievements. This paper provides a descriptive analysis of several aspects of the EU ETS from its inception through the end of the second phase in 2012, including both its achievements and challenges it has encountered. It discusses the historical and legal context in which the EU ETS developed and now operate ad it evaluates its performance so far by focusing on a number of key areas, including emissions, the development of permit prices, as well as offset use and prices. It also summarizes particularly salient aspects of the current short and medium-term policy debate.