Emissions Trading for building and transport - new Ariadne analyses

06/22/2022 - The extension of the European Emissions Trading to the buildings and transport sector (ETS2) as a core element of the European Fit for 55 package has been the subject of heated political debate in the EU Parliament. Only recently, a compromise on ETS reform was reached. Two new studies by the Ariadne Project with the participation of PIK examine how fairness and solidarity can be preserved in the ETS 2 design.
Emissions Trading for building and transport - new Ariadne analyses
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The new Emissions Trading Scheme for Buildings and Road Transport (ETS2) proposed by the European Commission as part of the Fit for 55 package is central to decarbonising these two sectors. However, a uniform EU-wide CO2 price has significant financial distributional implications - both between EU member states and within individual member states themselves. To give the ETS2 and its price signal the necessary political robustness and lasting credibility, it is essential that these distributional impacts are managed in a way that ensures solidarity and fairness. Experts from Ecologic Institute, Potsdam Institute for Climate Impact Research, RWI - Leibniz Institute for Economic Research, Mercator Research Institute on Global Commons and Climate Change, Stiftung Umweltenergierecht and ZEW - Leibniz Centre for European Economic Research analysed various options around the so-called Social Climate Fund for their respective implications.

Ariadne report:
Benjamin Görlach, Michael Jakob, Katharina Umpfenbach, Mirjam Kosch, Michael Pahle, Théo Konc, Nils aus dem Moore, Johannes Brehm, Simon Feindt, Fabian Pause, Jana Nysten, Jan Abrell (2022): Ensuring the Fairness and Solidarity of the ETS2 for Road Transport and Buildings. Kopernikus-Projekt Ariadne, Postdam.
Weblink to the report: https://ariadneprojekt.de/publikation/report-ensuring-the-fairness-and-solidarity-of-the-ets2-for-road-transport-and-buildings/

In a second Ariadne analysis, experts from ZEW - Leibniz Centre for European Economic Research, the Institute of Energy Economics and Rational Energy Use IER at the University of Stuttgart and the Potsdam Institute for Climate Impact Research analyse the economic effects of a tightening of the EU ETS targets using various models. The results show: A reallocation of the budget between the EU ETS and the Effort Sharing Regulation sectors of the magnitude currently under discussion can be beneficial from the point of view of economic efficiency. However, the effects on the welfare of the national economy are - given the current state of knowledge regarding abatement costs - relatively small. It also shows that the CO2 prices that would be necessary to achieve the emission targets range between 130 and 210 €/tCO2 in the EU ETS and between 175 and 350 €/tCO2 for the energy-related ESR emissions (ESR-E), if CO2 prices are the only policy instruments used for climate protection. Prices differ depending on assumptions on technology development and baseline pathway of the different models.

Ariadne analysis:
Jan Abrell, Süheyb Bilici, Markus Blesl, Ulrich Fahl, Felix Kattelmann, Lena Kittel, Mirjam Kosch, Gunnar Luderer, Drin Marmullaku, Michael Pahle, Robert Pietzcker, Renato Rodrigues, Jonathan Siegle (2022): Analysis: Optimal allocation of the EU carbon budget – A multi-model assessment. Kopernikus-Projekt Ariadne, Potsdam.
Weblink to the analysis: https://ariadneprojekt.de/publikation/analysis-optimal-allocation-of-the-eu-carbon-budget/

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Sarah Messina
Ariadne Communication
Potsdam Institute for Climate Impact Research (PIK)
Phone: +49 (0) 331 288 2544
Email: ariadne-presse@pik-potsdam.de