The Ten-Year Rule: Allocation of Emission Allowances in the EU Emission Trading System

摘要: In its guidance on National Allocation Plans (NAPs), the European Commission has discouraged Member States from adopting allocation methodologies that would provide incentives to firms affecting their compliance behavior. The purpose is promote economic efficiency and prevent strategic behavior deviates individual collective cost-minimization. For example, some reward one type of investment over another. To discourage such actions, EU Emission Trading System guidelines prohibit ex post redistribution emission allowances within an period based in period. Similarly, indicated decisions about initial distribution second phase (2008-2012) must depend measures prior 2005 so as not give companies incentive adjust receive a larger allowance allocation. However, two other aspects NAPs—the treatment closures new entrants—may also affect firm An undercurrent these question whether should allow incumbent emitters hold infinitely lived, once-and-for-all property rights share future. This paper develops approach for balancing considerations with perceived issues fairness. We propose ten-year rule guide policy regarding closure existing sources status general. A address fairness capture important part potential gains could be achieved through efficient allowances.