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Paying the Carbon Price

The Subsidisation of Heavy Polluters under Emissions Trading Schemes

Elena de Lemos Pinto Aydos

Paying the Carbon Price analyses the practice of freely allocating permits in Emissions Trading Schemes (ETSs) and demonstrates how many heavy polluters participating in ETSs are not yet paying the full price of carbon. This innovative book provides a framework to assist policymakers in the design of transitional assistance measures that are both legally robust and will support the effectiveness of the ETSs whilst limiting negative impacts on international trade.
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Chapter 2: Carbon leakage and industry assistance

The Subsidisation of Heavy Polluters under Emissions Trading Schemes

Elena de Lemos Pinto Aydos

Extract

Chapter 2 discusses the theory of carbon leakage and competitiveness concerns in relation to emissions-intensive and trade-exposed sectors participating in ETSs. Two measures are often considered as alternatives to avoid competitiveness issues and carbon leakage from the implementation of ETSs, that is, border carbon adjustments (BCA) and the free of cost allocation of permits. While BCAs are not very popular, it is possible that, due to the adoption of free allocation of permits, carbon-pricing schemes have been failing to implement the polluter pays principle. Keywords: emissions trading – carbon leakage – free allocation – polluter pays principle

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