Generous Allocation and a Ban on Banking : Implications of a Simulation Game for EU Emissions Trading

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Schleich, Joachim ; Ehrhart, Karl-Martin ; Hoppe, Christian ; Seifert, Stefan:
Generous Allocation and a Ban on Banking : Implications of a Simulation Game for EU Emissions Trading.
In: Antes, Ralf ; Hansjürgens, Bernd ; Letmathe, Peter (Hrsg.): Emissions Trading and Business. - Heidelberg : Physica Verlag , 2006 . - S. 27-36 . - XIV, 400 S.
ISBN 978-3-7908-1747-8
DOI: https://doi.org/10.1007/3-7908-1748-1_3

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Abstract

Admitting banking in emissions trading systems reduces overall compliance costs by allowing for intertemporal flexibility: cost savings can be traded over time. However most, if not all, EU Member States prohibit the transfer of un-used allowances from the period of 2005–2007 into the first commitment period under the Kyoto Protocol, i.e. 2008--2012. At the same time, allowances appear to be allocated fairly generously to the emissions trading sector. In this paper, we first explore the implications of such a ban on banking when initial emission targets are lenient. This analysis is based on a simulation which was recently carried out in Germany with companies and with a student control group. The findings suggest that an EU-wide ban on banking would lead to efficiency losses in addition to those losses which arise from the lack of intertemporal flexibility.