The Changing Role of Carbon Pricing in the EU

Publication date: 6 Feb 2020 | Publication type: National Institute Economic Review | External Author(s): Elkerbout, M | JEL Classification: P48, Q54, Q58, L52, F53 | Journal: National Institute Economic Review Issue 251 | Publisher: Cambridge University Press

Carbon pricing has been the most prominent climate change mitigation policy for the EU since the launch of its emissions trading system (ETS) in 2005. Since then, the context of international climate policy as well as of the socio-political and economical context of decarbonisation has changed considerably. The 2015 Paris Agreement engages virtually every country unlike its predecessor, while non-carbon pricing policies have led to rapid cost reductions in renewables, even if other sectors (particularly in energy-intensive industry) have not seen similar developments. This paper examines how the role of carbon pricing in the EU climate policy mix has evolved from its beginnings as a means to help achieve modest targets under the Kyoto Protocol, to a policy instrument increasingly augmented by a wider policy mix aimed at reaching no net emissions of greenhouse gases by mid-century. 

Keyword tags: 
EU climate policy
carbon pricing
emissions trading
political economy of decarbonisation