ECN publicatie:
The interaction between the EU emission trading scheme and national policies
Gepubliceerd door: Publicatie datum:
ECN Beleidsstudies 1-7-2005
ECN publicatienummer: Publicatie type:
ECN-RX--05-137 Artikel wetenschap tijdschrift
Aantal pagina's:

Gepubliceerd in: Climate Policy (Earthscan), , 2005, Vol.5, p.79-96.


National energy policies usually have a significant impact on the sectoral and overall CO2 emissions of an EU Member State. Once the proposed EU emissions trading scheme (EU ETS) becomes operational, however, the CO2 performance of these policies, i.e. their effectiveness and efficiency in reducing CO2 emissions, will differ depending on whether they affect fossil fuel use by the participating or non-participating sectors of this scheme. This article discusses in particular the CO2 performance of national energy policies affecting the participating sectors of the EU ETS. A major conclusion is that once the EU ETS becomes operational, the ejfectiveness of all other policies to reduce CO2 emissions of the participating sectors becomes zero. Moreover, in a perfect economy with no market failures, these policies will lead to a lower CO2 efficiency and less optimal market operations of the EU ETS. Hence, in such a situation, this coexistence of policy instruments cannot be justified from a CO2 efficiency point of view. It will be argued, however, that there are three reasons why the joint use ofthe EU ETS and policies affecting the fossil fuel use of the participating sectors may be justified: (1) improving the design of the EU ETS, (2) correcting for market failures, and (3) meeting other policy objectives besides CO2 efficiency. The ideas expressed in this article are illustrated by a detailed numerical example on the interaction between emissions trading and national energy policies. The article concludes with a summary of its major findings and policy implications.

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