Cross Border Trading and Borrowing in the EU ETS

Abstract

This paper exploits a little used data resource within the central registry of the European Union’s Emissions Trading System (EU ETS) to analyze cross border trading and inter-year borrowing during the first trading period (20052007). Cross-border flows were small in the aggregate but remarkably frequent in matching allowance deficits and surpluses at the installation level throughout the EU. These data also indicate that a novel feature of the EU ETS—the ability to borrow allowances from the forward allocation to satisfy current compliance requirements—was also used. These data provide evidence that the precondition of efficient abatement in a cap-and-trade system—widespread use of trading opportunities—was present in the first period of the EU ETS.

Keywords

EU ETS Cross-border trade Borrowing CO2 emissions

Get full access to this article

View all access options for this article.

References

Convery

Ellerman

De Perthuis

(2008). The European Carbon Market in Action: Lessons from the First Trading Period. Interim Report, Available at: http://www.aprec.net/documents/08-03-25_interim_report_en.pdf.

Delbeke

Jos

(ed.) (2006). EU Environmental Law: The EU Greenhouse Gas Emissions Trading Scheme. (volume IV of the EU Energy Law series ). Brussels: Claeys & Casteels.

Ellerman

A. D.

Buchner

B. K.

. “Over-allocation or Abatement? A Preliminary Analysis of the EU ETS Based on the 2005-06 Emissions Data.” Environmental & Resource Economics. 41(2): 267-287.

Denny

Ellerman A.

Buchner

Carraro

, (eds.) (2007). Allocation in the European Emissions Trading Scheme: Rights, Rents and Fairness. Cambridge (UK): Cambridge University Press. European Commission. Community International Transaction Log. (data downloaded on 5th May 2008). Accessible at: http://ec.europa.eu/environment/ets/.

Fazekas

Dora

(2008a). “Auction Design for Selling CO2 Emission Allowances,” in Rodi

Michael

(ed.), Emissions Trading in Europe: Initial Experiences and Lessons for the Future. Berlin. Also available in working paper format at http://www.aprec.net/documents/08-04-28_eu_ets_auctions_fazekas.pdf

Fazekas

Dora

(2008b). “Hungarian Experience with the EU ETS.” Available at: http://www.aprec.fr/documents/08-08-hungarian_experience_with_the_eu-ts.pdf.

Kerr

Andy

. (2007). “Is emissions trading working for Europe?” Environmental Finance. (November): S30-S32

Kettner

Koeppl

Schleicher

S P

Thenius

(2007). EU Emissions Trading Scheme: The 2005 evidence. Working Paper 22.2007, Fondazione Eni Enrico Mattei, Milan.

Lekander

(2006). “CO2 Price Still Too Low.” Carbon Market Europe. (April 21): 1.

10.

McGuinness

Trotignon

(2007). Technical Memorandum on Analysis of the EU ETS Using the Community Independent Transaction Log. Available at http://web.mit.edu/ceepr/www/publications/workingpapers/2007-012.pdf.

11.

Parsons

John

Denny Ellerman

(2006). “Shortage, Inter-period Pricing and Banking” (Invited Point of View with John Parsons), Tendances Carbone: The European carbon market monthly bulletin. (July). Available at: http://www.caissedesdepots.fr/GB/espace_presse/publications_doc/tendances_carbone_n5_eng.pdf.

12.

Trotignon

Delbosc

(2008). Allowance Trading Patterns in the European CO2 Market's Trial Period: What does the CITL reveal? Climate Report #13. Available at http://www.caissedesdepots.fr/IMG/pdf_08-06_Allowance_trading_what_does_the_CITL_reveal.pdf.

13.

Trotignon

Ellerman

A. Denny.

(2008). Compliance behavior in the EU ETS: Cross-border trading, banking, and borrowing. Available at: http://web.mit.edu/ceepr/www/publications/workingpapers/2008-012.pdf.