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Claudia Kettner

The idea of emissions trading reflects the fact that the costs of reducing emissions differ between regulated entities. Differences in marginal abatement costs will hence spur permit trading, leading to their equalization across market participants and aggregate cost efficiency in equilibrium. In view of the broad range of activities covered by the EU ETS, one can expect significant differences in emission reduction costs and hence strong incentives for trade. This chapter presents empirical evidence on trading in the EU ETS: EUA trade is analysed and discussed and the use of international credits for compliance under the EU ETS is addressed on country and sector level. In addition, trading flows on installation and company level are assessed. The empirical analysis of the EU ETS shows that the assumptions of the theory of emissions trading are not matched by the real-world setting. Allowance imports and exports showed only a very limited correlation with allowance surpluses and allowance deficits. This phenomenon cannot only be observed at country and sector level, where differences between installations and intra-firm transfers could have been a possible explanation for these discrepancies, but first analyses of trading in the EU ETS show that several companies have bought additional allowances on the market in Phase 1 despite being endowed with surplus allocation and the absence of banking between Phases 1 and 2. While the EU ETS is far from being a perfect market, empirical evidence shows an increase in trading activity since 2005 as agents became accustomed to the new market. A higher stringency of the cap in the EU ETS and the possibility of banking allowances might help stabilise carbon prices and hence mitigate inefficiencies.

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Claudia Kettner and Daniela Kletzan-Slamanig

Renewable energy technologies play a decisive role for climate change mitigation and environmental protection but also in the context of energy security and cost competitiveness (e.g., Europe 2020 strategy). So far, renewable energy technologies are generally not cost competitive compared to fossil energy technologies. Therefore, the EU and its member states have introduced policy targets and support schemes for achieving a certain share of renewables in total electricity supply. The support instruments are either price based or quantity based. According to economic theory, the two types of instruments deliver the same result; they are both environmentally effective and economically efficient. However, in the real world, the different instruments may result in different outcomes: price-based instruments provide (higher) certainty regarding the price level, while quantity-based instruments provide (higher) certainty regarding the effective diffusion of renewable energy technologies. Renewable electricity support schemes differ between the European countries. Feed-in tariffs and feed-in premiums are the most relevant support schemes in the European Union; often they are complemented by other instruments such as investment grants, tax exemptions or fiscal incentives. Quota obligations are implemented in five EU member states. Frequently, this instrument is also combined with feed-in tariffs for specific technologies and/or plant sizes. In addition to the instruments chosen, the support level for renewable energies also differs significantly between EU member states. Furthermore, the support schemes have been frequently adapted by member states not only with respect to the support level but also with respect to the predominant policy instrument. This chapter presents an overview of the development renewable electricity support schemes in EU member states. Based on empirical data as well as on the available literature, the schemes are assessed in terms of their environmental effectiveness and economic efficiency and policy recommendations aredeveloped.

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Claudia Kettner and Daniela Kletzan-Slamanig

In the EU CO2 emissions from industry and energy supply are regulated under the EU Emission Trading Scheme. In contrast, emissions from private households, transport and other small sources are regulated on the Member State level as no comprehensive EU policy strategy is in place for these sectors. Policy instruments specific to the transport sector include fuel taxes, vehicle registration taxes and ownership taxes, which can each contain a specific CO2 component, as well as performance standards and road pricing schemes. This chapter includes an empirical analysis of energy and carbon taxes in the transport sector for the EU Member States focusing on an assessment of fuel tax rates as well as on registration and ownership taxation of passenger cars. It is shown that Member States' tax systems still exhibit pronounced differences with respect to both tax categories. Taxation can make a significant contribution towards achieving emission reductions in the transport sector and should be given more weight by Member States in view of achieving their greenhouse gas reduction targets.

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Claudia Kettner and Daniela Kletzan-Slamanig

Climate change is widely accepted to pose a range of risks and challenges for Australia. As a result, Federal, State/Territory, and local governments are taking action to both mitigate, and adapt to, the consequences of climate change. This chapter explores two overarching issues of how activities undertaken to mitigate climate change are affecting land use in Australia. First, what are the nature and scope, and the grounds for exercising rights over private property under Australian law in the context of climate change? Second, how is use and enjoyment of private property affected by Australia’s flagship mechanism to encourage GHG emissions mitigation, the Emissions Reduction Fund (‘ERF’)?

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Claudia Kettner, Daniela Kletzan-Slamanig and Angela Köppl

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Claudia Kettner, Daniela Kletzan-Slamanig and Angela Köppl

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Claudia Kettner, Daniela Kletzan-Slamanig, Stefan E. Weishaar and Irene J.J. Burgers

Economic literature generally favours market-based instruments for regulating environmental externalities, since they ensure compliance at the least cost to society. With the focus shifting to carbon dioxide after the adoption of the Kyoto Protocol in 1997, emission taxes have increasingly been introduced. This chapter reviews the theoretical economic and legal literature on energy and emission taxes. From an economic perspective, the focus is on theoretical recommendations regarding the optimal design of environmental/carbon taxes, their performance relative to other instruments and the concept of a double dividend. The survey of the legal literature concludes that many different aspects must be considered in designing a carbon tax, regarding both the types of legal instruments to be used and their actual design. This overview of economic and legal aspects may help to create an effective and efficient regulatory system for achieving long-term emission reductions.