Market Based Instruments

Market Based Instruments

National Experiences in Environmental Sustainability

Critical Issues in Environmental Taxation series

Edited by Larry Kreiser, David Duff, Janet E. Milne and Hope Ashiabor

This detailed book explores how market based environmental strategies are used in various countries around the world. It investigates how successful sustainability strategies used by one country can be transferred and used successfully in other countries, with a minimum of new research and experimentation. Leading environmental taxation scholars discuss this question and analyse a set of key case studies.

Chapter 8: Levelling the playing field or playing on unlevel fields: the industry assistance framework under the European Union ETS, the New Zealand ETS, and Australia’s CPM

Elena de Lemos Pinto Aydos

Subjects: economics and finance, environmental economics, public finance, environment, environmental economics, environmental law, law - academic, environmental law, tax law and fiscal policy


Assistance to emissions-intensive trade-exposed (EITE) sectors in the form of free-of-cost allocation of permits has been justified on the grounds of ‘levelling the playing field’ and preventing carbon leakage. As a result, emissions trading schemes are adopting different criteria and levels of assistance to deal with this issue, which raises the following question: is it possible that instead of a level playing field, these assistance measures are creating a slightly more uneven arena? This chapter looks at the allocation of free-of-cost emissions permits to EITE sectors. It does so by comparing the industry assistance framework under the European Union Emissions Trading System (EU ETS), the New Zealand Emissions Trading Scheme (NZ ETS) and Australia’s Carbon Pricing Mechanism (AUS CPM). The comparative analysis demonstrates that there are significant discrepancies, not only with regards to the eligibility thresholds, but also the levels of allocation to industry sectors across the different schemes. Consequently, these assistance measures may impact trade decisions such as the relocation of new investment. This may be particularly the case where ETSs are linked.

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