Climate Task Force

Europe’s Emissions Trading System

Cap-and-trade, the approach to climate change preferred by many environmental groups as well as President Obama, is under scrutiny once again in the U.S. Congress. The House of Representatives narrowly passed a classic cap-and-trade bill in 2009, and members of the Senate have advanced at least four major variants of the approach this year.

In order to better understand how the approach works in practice, we need only look to the European Union, where a cap-and-trade system has operated since 2005, called the Emissions Trading System (ETS). In this rigorous and perceptive new analysis, Harvard University Professor of Economics Richard Cooper examines the record of the ETS with regard to certain features of cap-and-trade systems that have raised concerns among many economists and environmentalists: the volatility of permit prices; the system’s complexity; the permit market’s vulnerability to speculation and manipulation; and cap-and-trade’s practical capacity to reduce emissions.

Europe’s Emissions Trading System

Europe’s Emissions Trading System

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6 Responses to “Europe’s Emissions Trading System”

  1. […] The U.S. Climate Task Force has released a new report examining how Europe’s cap-and-trade system has worked. The report, written by Harvard economist Richard Cooper, outlines how the volatile program has been prone to market manipulation and has not significantly reduced greenhouse gas emissions. The report, “Europe’s Emissions Trading System,” is available to read on CTF’ website. […]

  2. […] than the US housing market, which recently ignited a global recession when its bubble burst. A recent study by Harvard professor Richard Cooper analyzes the various phases of implementing the ETS, […]

  3. […] article mirrors the findings of a recent study released by Harvard Professor Richard Cooper on Europe’s Emissions Trading System (ETS). The professor of International Economics recently stated in an interview that “(c)arbon […]

  4. […] New York Times’ article, Center for Economic Performance researcher Ralf Martin warns against Europe’s already fledgling cap and trade […]

  5. […] New York Times’ article, Center for Economic Performance researcher Ralf Martin warns against Europe’s already fledgling cap and trade […]

  6. […] That four word question offers a great deal of insight into the reason no “cap and trade” proposal has ever received more than 48 votes in the Senate — far short of the 60 necessary to pass such economically significant legislation. Carbon trading programs designed to reduce greenhouse gas emissions are wildly unpredictable and create price volatility. Just consider the EU’s experiences with its five-year old Emissions Trading Scheme. […]

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