Mission Accomplished? An Ex-post Predictive Evaluation of the Effectiveness of the EU ETS in Reducing Regional Fossil Fuel Carbon Emissions

This study evaluates the effectiveness of the first three phases (2005-2019) of the European Union Emissions Trading System (EU ETS) in reducing fossil fuel CO2 emissions in 248 socio-economic regions from 25 EU ETS Member States. Considering the beginning of each phase as an intervention, the paper adopts an advanced predictive modeling framework to build counterfactual fossil fuel CO2 emissions for each post-intervention period, and analyzes, in time and space, the intervention effect by comparing actual emissions with counterfactual estimates. The results of the temporal analysis indicate a significant overall emissions reduction in the second and third phases and 8 (out of 36) months of the first phase. The spatial analysis has found evidence for significant emissions reduction in 84, 209 and 226 regions in the first, second and third phase, respectively. The results also demonstrate that 66 European regions went through significant emissions reduction in all three phases