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Cited by 9Climate Change Policy and EconomicsEU Law and Policy AnalysisEuropean Union Policy and Governance

Beyond Control: Policy Incoherence of the EU Emissions Trading System

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Willner, Maximilian, Perino, Grischa·2022·Politics and Governance
DOI 10.17645/pag.v10i1.4797
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Abstract

In this article, we explain why the current climate policy mix of the European Union (EU), consisting of the EU Emissions Trading System (ETS) and overlapping policies, is incoherent with respect to emission abatement and cost-effectiveness. The concept of policy coherence guides our analysis in identifying the EU ETS’ current dynamic supply adjustment mechanism, the Market Stability Reserve (MSR), to be at the heart of the shortcomings of current market design. Incoherence emerges due to the MSR’s quantity-based indicator for scarcity. It only works well for current and past demand fluctuations, but not for anticipated changes in demand, e.g., caused by a member state’s fossil-fuel phase-out. As a result, instead of fostering synergies as intended, the MSR undermines coherence by creating backfiring interactions and making precise predictions of overlapping policies’ impacts close to impossible. Considering the European Commission’s reform proposal of July 2021, we argue that a change in the MSR’s parametrisation leaves the fundamental cause of incoherence unaddressed. Based on recent findings in the economics literature, we propose introducing a price-based indicator for scarcity as a solution to substantially reduce the current incoherence of the policy mix.

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Authors
Willner, M., & Perino, G.
Affiliations
Universität Hamburg (DE)
ORCID
Venue
Politics and Governance
Publisher
Cogitatio
Published
2022-02-23
Volume
10
Issue
1
ISSN
2183-2463 (ISSN-L)
DOI
10.17645/pag.v10i1.4797
OpenAlex
W4213124497
Cited by
9
References
39
Citations by year
2025: 3 · 2024: 2 · 2023: 1 · 2022: 3
FWCI
1.81
Type
journal article
Language
en
Open access
Licence
Locations
  • Politics and Governance (publishedVersion, cc-by)
  • Social Science Open Access Repository (GESIS – Leibniz Institute for the Social Sciences) (submittedVersion)
  • RePEc: Research Papers in Economics (submittedVersion)
  • DOAJ (DOAJ: Directory of Open Access Journals) (submittedVersion, cc-by-sa)
  • Politics and Governance (submittedVersion, cc-by)
Funders
  • Deutsche Forschungsgemeinschaft (EXC2037, 390683824)
  • Bundesministerium für Bildung und Forschung (03SFK5S0, 390683824)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
  • Social Sciences › Law › EU Law and Policy Analysis
  • Social Sciences › Political Science and International Relations › European Union Policy and Governance
Keywords
EU Emissions Trading System, Market Stability Reserve, policy coherence, carbon pricing, emission reduction, cost-effectiveness, fossil fuel phase-out, market design

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