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Cross Border Trading and Borrowing in the EU ETS

Cross Border Trading and Borrowing in the EU ETS A. Denny Ellerman* and Raphael Trotignon** This paper exploits a little used data resource within the central registry of the European UnionÕs Emissions Trading System (EU ETS) to analyze cross border trading and inter-year borrowing during the first trading period (2005- 2007). Cross-border flows were small in the aggregate but remarkably frequent in matching allowance deficits and surpluses at the installation level throughout the EU. These data also indicate that a novel feature of the EU ETSÑthe ability to borrow allowances from the forward allocation to satisfy current compliance requirementsÑwas also used. These data provide evidence that the precondition of efficient abatement in a cap-and-trade systemÑwidespread use of trading opportunitiesÑwas present in the first period of the EU ETS.

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Energy Specializations: Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
Q54 - Climate; Natural Disasters and Their Management; Global Warming
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: EU ETS, Cross-border trade, Borrowing, CO2 emissions

DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI2-4

Published in Volume 30, Special Issue #2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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