Policy Article

Step by step towards a comprehensive European emissions trading system (in German)

Kiel Policy Briefs, 127

German greenhouse gas emission reductions outside the European Emissions Trading Scheme (EU ETS) are insufficient, although a variety of instruments are used and considerable funds are spent. The authors propose that the German Climate Cabinet should adopt instruments that harmonize the carbon price across as many different sectors as possible, providing at the same time incentives and linkage options for European and international partners in joining forces to achieve efficient climate policy. They are advocating achieving a comprehensive and thus efficient EU emissions trading system across all sectors and countries by introducing initially a dual pricing system through a national emissions trading scheme in sectors not yet covered by European Emissions Trading Scheme. The introduction of national emissions trading schemes (in Germany and other joining European partner countries) should be accompanied with turning away from dirigiste interventions, the introduction of mechanisms that ensure minimum carbon prices, and the redistribution of carbon revenues. To prevent carbon leakage and provide incentives for international introductions of CO2 price schemes, the European Emission Trading Scheme should be supplemented with carbon border tax adjustment.