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This paper discusses fundamental aspects of the European emissions trading system which has been implemented in January 2005. We show how institutional features set by the EU Commission and the required subsidiary decisions by the respective Member States are potentially in conflict with the objectives of efficiency, compensation and competition neutrality. Inefficiencies can emerge from the decisions on the number of emission allowances and the way in which they are allocated. These problems are intensified by pressure from political interest groups. We argue that costs from recurring political debates and decisions on the National Allocation Plans could be avoided by using truly lump-sum-free allocation rules or moving towards auctioning off emission allowances.

Der EU-Emissionshandel im Zielkonflikt zwischen Effizienz, Kompensation und Wettbewerbsneutralität