Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/274392 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Open Innovation: Technology, Market, and Complexity [ISSN:] 2199-8531 [Volume:] 8 [Issue:] 2 [Article No.:] 91 [Year:] 2022 [Pages:] 1-27
Publisher: 
MDPI, Basel
Abstract: 
The EU has established the world's first cross-border emission-trading systems (ETS) for greenhouse gas (GHG) emissions, currently covering aviation, emission-intensive sectors, and electricity (EITE). The EU Commission has offered to apply emissions trading in new sectors where emissions from maritime transport will be incorporated into the current EU ETS, while a separated emissions trading system will cover emissions from road transport and the building sector. This paper employs a multi-regional multi-sectoral computable general equilibrium (CGE) model with two simultaneous international emission permit markets. After examining the abatement costs for the EU regions, various policy scenarios are implemented to study the welfare effects of forming an ETS covering the sectors other than EITE (NEIT) and its linking with the EITE sectors under two different baselines and four emission reduction targets. The results provide several important insights: (i) Marginal abatement costs in Germany and the Eastern European Union region (EEU) are significantly lower than in the rest of the EU regions. (ii) The carbon price in the emission permit market covering NEIT is significantly higher than the carbon price in the emission permit market covering EITE. (iii) Germany and EEU appear as notable suppliers of emission permits in both markets. (iv) There is a significant aggregate welfare gain under the scenario in which the ETS covering NEIT co-exists parallel with the ETS covering EITE. (v) The aggregate welfare in the EU under the full integration of EITE and NEIT may fall below its value under the scenario with two parallel emission permit markets.
Subjects: 
carbon pricing
climate mitigation
climate policy
computable general equilibrium
emissions trading
European Union
innovative market design
Paris Agreement
regional cooperation
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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