Publications

The ETS: a residual market for carbon abatement in need of a structural reform

18 March 2012 - Carbon Trends - By : Fabien ROQUES

The EU ETS has moved from centerstage to the backseat of European decarbonization policy. Reform is needed in order to provide clarity on the long term emission reduction objectives (for phase 4 beyond 2020), but most importantly, to introduce some form of allowance supply management and thereby reduce the risk of future policy intervention.
Following the deterioration of the European macroeconomic outlook in the summer 2011, carbon prices have declined to levels below 10 €/tCO2. This initiated a political debate on whether the ETS should be reformed to bring carbon prices back into a higher range that would be more supportive of the European decarbonization agenda.
Let us first put things straight. The ETS market is working well and the current low carbon price simply reveals that the weak economic outlook and recent energy market developments have reduced the cost of complying with the predefined emission caps. If policy makers want to see a higher carbon price, they should commit to a more stringent cap for phase 4. But some argue that this would not be sufficient, given the lack of credibility of long term policy engagements and the short time horizon of many market participants. Hence the idea of an immediate tightening of the market through a set aside of allowances in phase 3 as part of the ongoing discussions on a new Energy Efficiency Directive.

The ETS: a residual market for carbon abatement in need of a structural reform Download
To learn more
  • 09/05/2025 Foreword of the week
    2030 and Beyond: Budgeting Europe’s Climate Transition

    The next long term EU budget will take us through the 2030 goal posts, by when GHG emissions should be down by 55%. It will also lay the groundwork for investing in a climate-neutral future for the continent towards the yet-to-be agreed objectives for 2040. So, when the European Commission presented its proposal for a €2 trillion multiannual financial framework (MFF) just before the summer break, there was good reason to carefully study the details from the perspective of closing the EU’s climate investment deficit.  

  • 09/03/2025
    State of EU progress to climate neutrality – ECNO 2025 Flagship report

    Europe is making progress on the clean transition, but the pace is too slow across several parametres. ECNO’s analysis is structured around 13 building blocks of the transition, tracking changes in the six-year trend for nearly 150 indicators and also the expected impact of policies – a new addition to this year’s report. In the 2025 edition, we also analysed the changes through the lens of broader EU objectives, namely competitiveness, resilience, and citizens’ well-being. 

  • 07/24/2025 Blog post
    Can the next EU budget point the way to an investment plan for climate transition?

    In July, Commission President von der Leyen announced a €2 trillion EU budget fit “for a new era,” set to launch for a seven-year period in 2028. As EU-watchers in Brussels and beyond scrambled to digest the reams of legislative proposals that followed this headline-grabbing announcement, much in the detail should give pause – especially from the perspective of closing the EU’s climate investment deficit.

See all publications
Press contact Amélie FRITZ Head of Communication and press relations Email
Subscribe to our mailing list :
I register !
Subscribe to our newsletter
Once a week, receive all the information on climate economics
I register !
Fermer