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Addressing 'Green paradox' of Green Deal - Tilburg University researchers suggest to rethink EU Emission Trading System

Published: 20th October 2020 Last updated: 06th November 2020

The Europe's Economic Policy Journal "Economic Policy" has featured the results of the work of the Tilburg University professor Reyer Gerlagh (Tilburg Sustainability Center), PhD researcher Roweno Heijmans (Tilburg Sustainability Center) and Professsor Knut Einar Rosendahl from the Norwegian University of Life Sciences. Their research suggested that the anticipated Green Deal policies that are intended to reduce carbon emissions could instead lead to increased EU emissions.

Their analysis of the interaction of the Green Deal with the Market Stability Reserve of the EU’s Emissions Trading System (EU ETS) shows how a ‘Green Paradox’ could arise. The authors propose rethinking the regulation of the EU ETS in way that differentiates two policy targets. The first is to support a smoothly working allowances trading market with sufficient but not excess liquidity. The second is to support a stable carbon price in the market, which should be not too sensitive to economic fluctuations, but importantly should be allowed to depend positively on expected cumulative carbon emissions in the EU ETS.
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