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Over-Allocation or Abatement? A Preliminary Analysis of the EU ETS Based on the 2005 Emissions Data

A.D. Ellerman and B.K. Buchner

Environmental and Resource Economics, Vol. 41, No. 2, pp. 267-287, 2008

A.D. Ellerman and B.K. Buchner, Environmental and Resource Economics, Vol. 41, No. 2, pp. 267-287, 2008

This paper provides an initial analysis of the EU ETS based on the installation-level data for verified emissions and allowance allocations in the first 2 years of the first trading period. These data reveal that CO2 emissions were about 3% lower than the allocated allowances. The main objective of the paper is to shed light on the extent to which overallocation and abatement have taken place in 2005 and 2006, when a significant CO2 price was observed. We propose a measure by which over-allocation can be judged and provide estimates of abatement based on emissions data and indicators of economic activity as well as trends in energy and carbon intensity. Finally, we discuss the insights and implications that emerge from this tentative assessment.

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