Methods for Evaluating the Performance of Emissions Trading Schemes

The document outlines a framework for evaluating emissions trading schemes (ETS) by categorising assessment into operational aspects and outcomes. It reviews methodologies for analysing carbon prices, market activity, and transaction costs, as well as outcomes related to emissions, innovation, trade, and employment. The authors argue that while operational data is often readily available, assessing long-term outcomes like innovation and employment requires high-quality, disaggregated firm-level data and counterfactual baselines. The paper concludes with specific recommendations for China's pilot schemes, suggesting a prioritisation of carbon price and emissions analysis due to data availability, while advising a cautious, qualitative approach to innovation and trade effects in the short term.

• Carbon prices serve as a primary indicator of ETS efficiency and market health; for instance, the collapse of prices to nearly zero in 2006 indicated that the EU ETS Phase I had over-allocated allowances.
• Evaluating market activity is essential to detect market power and potential manipulation; research into the EU ETS found that excessive allowance holdings by certain electricity firms were consistent with strategic price manipulation.
• Transaction costs, while generally small compared to abatement costs, act as 'deadweight losses' by diverting resources away from emissions reduction efforts.
• Measuring actual emissions reductions requires a counterfactual baseline, often estimated by extrapolating the historical relationship between GDP and emissions or using econometric time-series modelling.
• Quantitative analysis of the EU ETS suggests a positive link between carbon pricing and innovation, with one study showing a 10% increase in low-carbon technology innovation among regulated companies compared to a counterfactual.
• Evidence regarding the impact of the EU ETS on trade and employment is limited or inconclusive; several studies found no significant trade effects for sectors like aluminium, cement, and steel, and no significant impact on employment levels.
• For the Chinese pilot schemes, the authors recommend prioritising the analysis of carbon prices and emissions reductions because the necessary data is more likely to be readily available.

APA

Sato, D. M., Laing, D. T., Cooper, S., & Wang, L. (2015). Methods for Evaluating the Performance of Emissions Trading Schemes. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2015/11/CS-ChinaETS-Evaluation-paper-final1.pdf

Chicago

Sato, Dr. Misato, Dr. Tim Laing, Simone Cooper, and Lixiang Wang. Methods for Evaluating the Performance of Emissions Trading Schemes. Climate Strategies, 2015. https://climatestrategies.org/wp-content/uploads/2015/11/CS-ChinaETS-Evaluation-paper-final1.pdf.

Wikipedia

{{cite report |last1=Sato |first1=Dr. Misato |last2=Laing |first2=Dr. Tim |last3=Cooper |first3=Simone |last4=Wang |first4=Lixiang |title=Methods for Evaluating the Performance of Emissions Trading Schemes |publisher=Climate Strategies |date=November 2015 |url=https://climatestrategies.org/wp-content/uploads/2015/11/CS-ChinaETS-Evaluation-paper-final1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sato2015methods, author = {Sato, Dr. Misato and Laing, Dr. Tim and Cooper, Simone and Wang, Lixiang}, title = {{Methods for Evaluating the Performance of Emissions Trading Schemes}}, institution = {Climate Strategies}, year = {2015}, month = nov, url = {https://climatestrategies.org/wp-content/uploads/2015/11/CS-ChinaETS-Evaluation-paper-final1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }