Shifting concerns for the EU ETS: are carbon prices becoming too high?
Open accessAbstract
Carbon prices in the EU Emissions Trading Scheme (EU ETS) have risen from around 5 euro per ton of CO 2 in 2017 to above 90 euro in 2021. One probable explanation is the cancellation mechanism implemented along with the Market Stability Reserve (MSR) of the EU ETS in 2018. We identify realistic conditions under which the MSR results in truly massive cancellation of emissions allowances, pointing to the steepness of the emissions pathway over time as essential. A flattening of the emissions pathway implies huge reduction in cumulative emissions, suggesting much higher ETS prices. The concerns about too low and ‘ineffective’ carbon prices may turn into concerns for too high prices. The results have important ramifications for planned revisions of the EU ETS.
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The increase in the marginal intake rate may also aggravate MSR impacts on price stability and make its asymmetric potency in reducing supply versus expanding it even more prevalent.
“The increase in the marginal intake rate may also aggravate MSR impacts on price stability (Gerlagh et al. 2022, Perino 2022) and make its asymmetric potency in reducing supply versus expanding it even more prevalent (Quemin 2022).”
From The Market Stability Reserve in the EU Emissions Trading System: A Critical Review (2023) · cites this paper as Gerlagh et al. 2022
In the Main text (page unavailable), Gerlagh et al. find that MSR cancellations can reinforce a very high allowance price, supporting concern about the MSR’s effects on prices. But they say their analysis tests sensitivity to market characteristics rather than MSR parameters; it does not establish that increasing the marginal intake rate aggravates price instability. The sentence attributes the separate claim about asymmetric supply effects to Quemin (2022), not to this paper. (LLM, conf=0.84)
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References 17 · Cited by 29
- Authors
- Gerlagh, R., Heijmans, R. J. R. K., & Einar Rosendahl, K.
- Affiliations
- Swedish University of Agricultural Sciences (SE)
- Corresponding author
- Heijmans, Roweno J R K
- Venue
- Environmental Research Letters
- Publisher
- IOP Publishing
- Published
- 2022-04-25
- Volume
- 17
- Issue
- 5
- Pages
- 054018
- ISSN
- 1748-9326 (ISSN-L)
- OpenAlex
- W4225678064
- Cited by
- 29
- References
- 17
- Citations by year
- 2026: 3 · 2025: 10 · 2024: 10 · 2023: 4 · 2022: 2
- FWCI
- 5.23
- Type
- journal article
- Language
- en
- Open access
- gold
- doi.org
- Licence
- Locations
- Environmental Research Letters (publishedVersion, cc-by)
- Research portal (Tilburg University) (publishedVersion, other-oa)
- Data Archiving and Networked Services (DANS) (submittedVersion, other-oa)
- DOAJ (DOAJ: Directory of Open Access Journals) (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Law › EU Law and Policy Analysis
- Life Sciences › Agricultural and Biological Sciences › General Agricultural and Biological Sciences › Agricultural Economics and Policy
- Keywords
- EU Emissions Trading System, carbon price, Market Stability Reserve, emission allowances, emission pathways, cumulative emissions, carbon pricing policy
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