Evaluating the EU Emissions Trading System: Take it or leave it?
Mirabelle Muûls, Jonathan Colmer, Ralf Martin and Ulrich J. Wagner
October 2016
12 p.
Carbon leakage


  • Since 2005, the European Union (EU) has been running a carbon market to govern the greenhouse gas emissions from 12,000 power and manufacturing plants in 31 countries.
  • This has led to a reduction in industrial carbon emissions.
  • It has had no detrimental effects on economic performance.
  • The scheme has been partly responsible for the increase in low-carbon ‘cleantech’ innovation since 2005.
  • The detailed design of a carbon market affects its impact on the risk of carbon leakage and the incentives it creates for cleantech innovation.
  • While there are opportunities for further improving the EU Emissions Trading System (ETS), evidence suggests that it is worthwhile maintaining and developing this landmark policy.
  • As an alternative policy, a carbon tax would provide more certainty and visibility for low-carbon business, therefore it should remain a potential tool for policymakers.
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