Winners and Losers of EU Emissions Trading: Insights from the EUTL Transfer Dataset

While distributional issues may not be the focus of most academic research into (EU) emissions trading, they do play an important role in the public debate and policy making. Carbon leakage provisions and the level of free allocation feature prominently in ongoing discussions about a reform of the EU Emissions Trading System (EU ETS) and are the subject of lobbying activities of companies and industry associations. In this paper, I therefore ask the question: Who were the winners and losers of EU emissions trading during its first period? And: What are the factors influencing whether a company stands to make a gain on the market for emissions permits or has to expect additional costs?

The aim is to provide input into the political debate, by understanding the distributional implications of certain design choices made in the context of the EU ETS. Also beyond the European policy context, these considerations are likely to be relevant. Following the Paris Agreement many jurisdictions have to decide which instruments to employ to put their mitigation contributions into practice. As one of the longest-running and largest carbon markets in the world, the EU ETS serves as an example for both the positive and negative lessons learnt.