Five myths about an EU ETS carbon price floor. CEPS Policy Insights No 2018/17, December 2018

Flachsland, Christian and Pahle, Michael and Burtraw, Dallas and Edenhofer, Ottmar and Elkerbout, Milan and Fischer, Carolyn and Tietjen, Oliver and Zetterberg , Lars (2018) Five myths about an EU ETS carbon price floor. CEPS Policy Insights No 2018/17, December 2018. [Policy Paper]

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Abstract

This policy insight builds on the workshop EU ETS Reform: Taking Stock and Examining Carbon Price Floor Options, held at the Centre for European Policy Studies (CEPS) in Brussels on July 3, 2018. The workshop was cosponsored by CEPS and the AHEAD and Mistra Carbon Exit projects. While the paper draws on insights from workshop discussions, its views are solely those of the authors. It outlines different perspectives on the past performance of the EU Emissions Trading System (ETS) in terms of its allowance price (Section 1), analyses how the recent reform responded to related challenges (Section 2), and considers the case for introducing a carbon price floor in the EU ETS (Section 3). The main part of the paper (Section 4) identifies five myths in the debate about an EU ETS price floor and critically challenges them. Section 5 concludes by discussing potential entry points for introducing a carbon price floor in the context of the upcoming EU climate policy process.

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