In 2005, an EU-wide emissions trading scheme covering major CO2 producing sites shall come into power. The key objective of the trading scheme is to promote cost-efficiency of carbon reduction within the EU. We identify policy-relevant tradeoffs between overall efficiency, compensation and...

Starting in 2005, the EU will implement a CO2 emissions trading scheme. In this paper we show that the outspoken goals of economic efficiency and free allocation of allowances are incompatible with harmonized allocation rules. In general, the assignment of allowances is endogenous and differs...

Implementation of an EU-wide emissions trading system by means of National Allocation Plans is at the core of European environmental policy agenda. Member States are faced with the problem of allocating their national emission budgets under the EU Burden Sharing Agreement between...

Carbon leakage provides an efficiency argument for unilateral climate policy to differentiate emission prices in favor of emission-intensive and trade-exposed sectors. At the same time, differential emission pricing can be (mis-)used as a beggar-thy-neighbor policy to exploit terms of trade....

In 2005, an EU-wide emissions trading scheme covering major CO2 producing sites shall come into power. The key objective of the trading scheme is to promote cost-efficiency of carbon reduction within the EU. We identify policy-relevant tradeoffs between overall efficiency, compensation and...