How the ENVI proposal for Phase IV of the EU ETS affects allowance prices

15 February 2017, by CGG

Photo: pixabay

Grischa Perino/Maximilian Willner

How the ENVI proposal for Phase IV of the EU ETS affects allowance prices

The European Union (EU) is in the process of reforming the Emission Trading System (ETS). In December 2016, the environmental committee of the European Parliament (ENVI) proposed further amendments to the ETS and the market stability reserve (European Parliament, 2016). The contribution of this note is to show how changes in design parameters affect price paths in the EU ETS with an active market stability reserve. It is based on an analytically tractable model (see Perino/Willner 2016, 2017). The simulations show the direction and general pattern of price changes induced by different policies.