Analyses of the effectiveness of trading in EU-ETS

The report evaluates the first two phases of the EU ETS, finding that while it successfully capped emissions, its actual abatement impact was modest (40–80 MtCO2/yr) and heavily influenced by the 2008-2009 financial crisis. It notes that the system failed to drive large-scale long-term low-carbon investment due to price volatility and over-allocation. The analysis also highlights significant 'windfall profits' in the power and industrial sectors resulting from free allowance allocations and the pass-through of carbon costs to consumers. The document concludes by suggesting strengthening measures such as price floors and set-asides, and reviews similar emerging schemes in jurisdictions like Australia, China, and the USA.

• The EU ETS has achieved attributable annual average emission savings estimated between 40 and 80 MtCO2, representing approximately 2-4% of total capped emissions.
• The 2008-2009 global financial crisis was a more significant driver of emissions reductions in the EU than the EU ETS itself, with the recession causing a contraction of GDP in the EU27 by nearly 5% in 2009.
• The EU ETS has not been sufficient to drive large, long-term decarbonization investments, though it has successfully integrated carbon considerations into corporate boardrooms and incentivized some small-scale efficiency investments.
• Significant 'windfall profits' occurred because power and industrial companies received allowances for free but passed the opportunity costs of carbon onto consumers through higher product prices.
• A substantial surplus of allowances exists in Phase II, with 77% of installations holding a surplus; the steel and cement sectors are major contributors, while the power sector faces a deficit.
• The collapse of carbon prices was caused not only by the recession but also by the EU ETS design's failure to account for complementary 2020 targets for renewables and energy efficiency.
• The report identifies five options for strengthening the EU ETS: tightening the 2020/2030 targets, lowering the cap, setting aside Phase III allowances, implementing an EU-wide Reserve Price Auction, or establishing national price floors.
• Other global schemes have adopted different strategies to secure industry buy-in: New Zealand used a 'buy-one-get-one-free' capped price, while China and India have focused on trading energy efficiency rather than absolute emissions.

APA

Grubb, M., Laing, T., Sato, M., & Comberti, C. (2012). Analyses of the effectiveness of trading in EU-ETS. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/cs-effectiveness-of-ets.pdf

Chicago

Grubb, Michael, Tim Laing, Misato Sato, and Claudia Comberti. Analyses of the effectiveness of trading in EU-ETS. Climate Strategies, 2012. https://climatestrategies.org/wp-content/uploads/2014/11/cs-effectiveness-of-ets.pdf.

Wikipedia

{{cite report |last1=Grubb |first1=Michael |last2=Laing |first2=Tim |last3=Sato |first3=Misato |last4=Comberti |first4=Claudia |title=Analyses of the effectiveness of trading in EU-ETS |publisher=Climate Strategies |date=February 2012 |url=https://climatestrategies.org/wp-content/uploads/2014/11/cs-effectiveness-of-ets.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{grubb2012analyses, author = {Grubb, Michael and Laing, Tim and Sato, Misato and Comberti, Claudia}, title = {{Analyses of the effectiveness of trading in EU-ETS}}, institution = {Climate Strategies}, year = {2012}, month = feb, url = {https://climatestrategies.org/wp-content/uploads/2014/11/cs-effectiveness-of-ets.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }