Report on expanding the sectoral and regional scope of the EU ETS

The ENTRACTE research project is aiming to analyse the European climate policy portfolio with special emphasis on the role of interactions between its different parts. The project’s ultimate goal is to provide pragmatic guidance to policy makers for designing effective, cost efficient and politically and legally feasible climate policy portfolios.

The EU ETS is currently going through a reform process and the outcome of the COP21 in Paris might require the European Union to broaden the scope of its regulated sectors. Concomitantly, an international agreement might create a new momentum to link the EU ETS to other emerging carbon markets. Therefore, this report assesses options for sectoral and regional expansion of the European Union Emissions Trading System (EU ETS). The report is built around three parts in which part I focuses on pricing emissions from the European agricultural sector and part II and III provide two different perspectives on linking options looking at asymmetric linking to an offset mechanism and full linking to an emerging ETS such as the Chinese ETS.

Authors: Godefroy Grosjean, Oliver Schenker, Sebastian Voigt