Carbon Pricing Project - CPI

The executive summary evaluates the EU ETS's role in driving low-carbon investment, finding that while it provides a useful framework, its impact is hindered by the Clean Development Mechanism, inadequate financial reporting standards, and short investment horizons for energy efficiency.

• The EU ETS helps capture the attention of decision-makers, with evidence showing that manufacturing companies are more likely to invest in low-carbon innovation when they expect future permit allocation to be more stringent. Additionally, for power generators, the relevance of the EU ETS and long-term climate policy targets are highly correlated and mutually reinforcing.
• Certain factors undermine the clarity of the EU ETS for business decision-making. The Clean Development Mechanism (CDM) allows European installations to potentially exceed the ETS cap by 1.5 billion tonnes of CO2 over ten years, which reduces low-carbon investment opportunities and creates uncertainty. Furthermore, current International Financial Reporting Standards (IFRS) fail to provide a 'true and fair view' of carbon costs, particularly when allowances are free.
• While the EU ETS contributes to the financial viability of projects, additional enabling policies are needed. Surveyed companies typically require energy efficiency investments to have a payback period of less than four years. Power technology companies identify technology-specific policies, such as feed-in tariffs, as the most critical factors for R&D and sales.

APA

Climate Policy Initiative (2011). Carbon Pricing Project - CPI. https://www.climatepolicyinitiative.org/publication/344/

Chicago

Climate Policy Initiative. Carbon Pricing Project - CPI. 2011. https://www.climatepolicyinitiative.org/publication/344/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Carbon Pricing Project - CPI |date=13 January 2011 |url=https://www.climatepolicyinitiative.org/publication/344/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2011carbon, author = {{Climate Policy Initiative}}, title = {{Carbon Pricing Project - CPI}}, institution = {Climate Policy Initiative}, year = {2011}, month = jan, url = {https://www.climatepolicyinitiative.org/publication/344/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }