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Allocation, allocation, allocation! The political economy of the development of the European Union Emissions Trading System
Author(s) -
Sato Misato,
Rafaty Ryan,
Calel Raphael,
Grubb Michael
Publication year - 2022
Publication title -
wiley interdisciplinary reviews: climate change
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.678
H-Index - 75
eISSN - 1757-7799
pISSN - 1757-7780
DOI - 10.1002/wcc.796
Subject(s) - emissions trading , scope (computer science) , compromise , european union , politics , economics , allowance (engineering) , economic system , climate change , economy , political science , economic policy , computer science , law , biology , programming language , ecology , operations management
The European Union's pioneering carbon Emissions Trading System, the EU ETS, has inspired countries around the world to launch their own CO 2 markets. This paper analyses the evolution of the EU ETS from a political economy perspective, emphasizing the interaction of economic principles and political interests at pivotal moments, and showing how each compromise changed the scope for future design choices. We focus on the allowance allocation issue, which provides a window into the complex tug‐of‐war between economic efficiency and the politics of distribution. Our account highlights the dynamic nature of CO 2 market reform, and provides lessons that can help inform the design of more stable and effective CO 2 markets in the future. This article is categorized under: Climate Economics > Economics of Mitigation The Carbon Economy and Climate Mitigation > Policies, Instruments, Lifestyles, Behavior