Cassotas

Special

CO2 Barometer

Centre for European Economic Research, Mannheim

ZEWnews Special · September/October 2012

The EU Emissions Trading System –
Incentive Effects Fail to Meet Expectations
The EU Emissions Trading System (EU
ETS) is a key instrument of the European
climate policy. As of the beginning of
2005, energy producers and energy-intensive industrial enterprises mustsurrender one emission allowance to the
government per tonne of CO2 emitted.
The EU determines the total amount of
available emission allowances and thus
establishes a CO2 cap, thereby ensuring
that the objective to reduce greenhouse
gas emissions throughout Europe by 21
per cent until 2020 compared to 2005 is
achieved. Some 50 per cent of the CO2
emissions are regulated according to thisscheme in Germany. In 2011, the plants
covered by the EU Emissions Trading System in Germany emitted 450.4 million
tonnes of CO2. Despite the German federal government’s turn to a nuclear phase-out policy in 2011 and the on-going
positive macroeconomic development in
Germany, emissions were reduced by 0.8
per cent compared to the previous year.

centives for long term investment in CO2mitigation measures.
In March 2011, the EUA price increased to nearly 17 euro per tonne in the
aftermath of the nuclear disaster in Fu-

Prices for Emission Allowances
Reach a Critical Level

kushima Daichi and the German moratorium on nuclear power. EUA prices, however, remained on this level only for a
couple of months. In mid-June 2011, an
on-going decline in prices already set in.
Despitea short recovery period in February and March, prices have remained
at the seven-euro-level since the beginning of 2012.
The decline in prices started with the
publication of a draft by the EU Commission for a new energy efficiency directive in
June 2011. The directive provides obliga-

The EU ETS has been criticised heavily
during the last year. The deterioration of
certificate prices,which had temporarily
dropped by more than 50 per cent, due
to the Europe-wide over-allocation of EU
emission allowances (EUAs), is one reason for the critical examination of the EU
ETS. As a result of the lasting low price
level of about seven euros, the EU ETS
carries the risk of generating only poor in-

BAROMETER

tory energy savings targets for EU Member
States. Market participantsare concerned
that the implementation of the intended
measures could lead to a considerably
decreased demand for EUAs. The publi-

Foto: digitalstock

In 2011, the plants covered by the European Emissions Trading System in Germany emitted 450.4 million
tonnes of carbon dioxide.

As part of a cooperative project with KfW Bankengruppe, the Centre
for European Economic Research GmbH (ZEW)is conducting a survey
among regulated companies and international experts of the EU Emissions Trading Scheme. The goal of the project is the analysis of the

cation of the Commission’s draft alone,
however, does probably not explain the
decline in prices sufficiently. In fact, the
reason for the development observed is
that numerous firms had over-allocated
EUAs as a consequence of thefinancial
and economic crisis and the persistent
weak economic development in many
countries of the euro area. The decrease in production resulted in reduced
CO2 emissions. Consequently, industrial
enterprises demanded less EUAs in order
to meet their EU ETS obligations than had

EU market for emission allowances and its development. The results
are reported in an annual publication, theKfW/ZEW CO2 Barometer.
Furthermore, a biannual report is published in order to provide information on recent market developments.

2 | S pecial CO 2 B arometer

Surrender of CERs and ERUs for compliance (in million certificates)
2008

2009

2010

2011

Total

CERs

82,5

77,9

116,9

178,8

456,1

ERUs

0,05

3,2

20,1

75,8

99,2

CERs

23,7

26,0...