Re-shaping the EU ETS as a safety net, not a driver

The EU ETS (Emissions Trading System) has struggled to cope with the current economic crisis which has caused a drop in the European carbon price, while the expected drastic drop in 2020 emissions will only add to the existing surplus of allowances. This highlights how necessary it is to reform the mechanism for managing this surplus or even to implement a carbon floor price, explain Charlotte Vailles at I4CE and Nicolas Berghmans at IDDRI. They say this crisis should lead Europe to consider the EU ETS no longer as the “cornerstone” or driver of decarbonisation, but as a safety net (as it is in California). They present evidence that suggests the EU ETS has had only a moderate effect on reducing emissions. It is other sector-targeted policies that have made the biggest difference, and that is where the policy focus should be for driving the reduction in emissions, argue the authors.[...]