EU ETS

Our analysis of the EU ETS, ETS2 and carbon allowance prices

The Carbon Allowance Tale - Part 1: An inefficient policy making tool?

The EU Emissions Trading System (EU ETS) aims to reduce greenhouse emissions by setting a cap on CO2 emissions, which decreases over time. Initially flawed by oversupply of carbon allowances, the scheme has evolved through regulatory adjustments to incentivize investment in decarbonization and promote responsible investing in green finance. The EU ETS is a blend of regulatory decisions with a free-market approach.

October 18, 2023

The Carbon Allowance Tale - Part 2: Adjustments towards a free market

The EU Emissions Trading System (EU ETS) has evolved from an inefficient, heavily regulated scheme to a more mature market using free-market mechanisms to achieve carbon emission reduction targets, aiming for carbon neutrality. Adjustments to EUA supply and demand, including the Market Stability Reserve, have contributed to a more efficient carbon price, supporting sustainable investment and responsible investing. This shows the importance of buying carbon allowances and the effect of carbon tax.

October 18, 2023