Economic Impacts of the EU ETS: Preliminary Evidence

Abstract

This chapter, from a monograph on climate change and European emissions trading, addresses the economic impact of the European Union (EU) Emissions Trading Scheme (ETS). The authors compare the expectations and predictions that accompanied the introduction of the system with the actual results after the first three years of emissions trading. Topics include the impact of the ETS on production costs and competitiveness, trading patterns (between sectors and countries), and the extent to which the EU ETS leads to actual investments in emission reduction and innovations. After reminding readers that any conclusions are preliminary at this point, the authors contend that the ETS is actually influencing operational and strategic decisions of energy intensive industries in the EU. There are also strong indications that the EU ETS actually contributes to emission reductions and to investment in the development and application of new, low-carbon technology.