Reducing carbon emissions with carbon markets

Researchers examine the effectiveness of carbon markets in reducing carbon emissions. International carbon markets put a price on carbon use in an effort to curb pollution from carbon emissions. However, whether these markets remain effective when carbon prices are low remains a subject of debate. Patrick Bayer and Michaël Aklin examined whether the European Union Trading System (EU ETS) reduced carbon emissions despite low carbon prices. For the analyses, the authors created a statistical model that combined two sets of sectoral emissions data spanning 1990-2016. The authors found that the EU ETS prevented approximately 1.2 billion tons of carbon dioxide from being emitted between 2008 and 2016. Accounting for the financial crisis that occurred between 2007 and 2008, an estimated 8.1-11.5% of emission reductions in regulated sectors was still attributable to the EU ETS. The authors also determined that low prices may have been indicative of a decrease in demand for emission permits, and that the EU ETS incentivized changes in emission patterns throughout Europe. The findings suggest that EU carbon markets are effective despite low carbon prices and that their effectiveness increases over time, according to the authors.

###

Article #19-18128: “The European Union Emissions Trading System reduced CO2 emissions despite low prices,” by Patrick Bayer and and Michaël Aklin.

MEDIA CONTACT: Patrick Bayer, University of Strathclyde, Glasgow, UNITED KINGDOM; tel: +44-1415482114, +44-7492199993; email:

[email protected]

,

[email protected]