About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

15 Rev. L & Econ. 1 (2019)

handle is hein.journals/rvleco15 and id is 1 raw text is: Edwin Woerdman* and Andries Nentjes Emissions Trading Hybrids: The Case of the EU ETS https://doi.org/10.1515/rle-2014-0054 Abstract: We argue that the European Union Emissions Trading System (EU ETS) has evolved into a hybrid of two design variants, allowance trading (cap-and- trade) and credit trading (performance standard rate trading), with an added feature of industry support to minimize carbon leakage. In particular the current rules tying free allowances to production capacity expansion, plant closure and capacity use have transformed the efficient cap-and-trade program that stood at the origins of the EU ETS into a system that even surpasses credit trading in paying hidden product subsidies to firms. This combination of rules encourages an inefficiently high level of investment in production capacity and an ineffi- ciently high output in industries exposed to international competition. The result is a sub-optimal EU Emissions Trading 'Hybrid' (which we therefore label as 'EU ETH'). Keywords: European Union Emissions Trading System, economic efficiency, cap-and-trade, performance standard rate trading, carbon leakage JEL codes: D21, D62, K32, Q48, Q54 I Introduction The idea of creating pollution markets received considerable attention by some of the founding fathers of law and economics, such as Calabresi and Melamed (1972) building upon Coase (1960). The concept has moved from theory to practice and is now firmly embedded in environmental law. The European Union (EU), for instance, has been building up experience with carbon dioxide (C02) emissions trading since 2005 (e. g. Faure and Peeters, 2008). The original EU Emissions Trading Directive determines the rules applying in the first period 2005-2007 and the second period 2008-2012 (Directive 2003/87/EC). The *Corresponding author: Edwin Woerdman, Faculty of Law, Department of Business Law, European Law and Tax Law, University of Groningen, PO Box 716, Groningen 9700 AS, the Netherlands, E-mail: e.woerdman@rug.nl Andries Nentjes, Faculty of Law, Department of Business Law, European Law and Tax Law, University of Groningen, PO Box 716, Groningen 9700 AS, the Netherlands, E-mail: a.nentjes@online.nl DE GRUYTER Rev Law Econ 2019; 20140054

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most