Carbon Leakage: Options for the EU. CEPS Special Report, March 2014

This CEPS Special Report builds on the first deliverable of the project entitled “Carbon leakage: Options for the EU”. It identifies carbon costs, and the ability to pass through carbon costs, as the main risk factors that could lead from asymmetrical carbon policies to carbon leakage. It also outlines and evaluates, based on criteria discussed in the paper, options for detecting and mitigating the risk of carbon leakage in three jurisdictions, with special attention to the EU ETS (Emissions Trading Scheme). Based on the analysis of approaches currently used in a number of existing carbon pricing systems, it identifies the balance between the number of sectors identified as being at risk, and the amount of compensation provided as a risk mitigation measure, as the critical element in providing an optimum approach to address carbon leakage risks. It also identifies a risk-based approach to identifying sectors at risk as allowing for a better reflection of reality in a counterfactual argument. Finally, the paper concludes that while, with some exceptions, there has been limited carbon leakage until now, the past may not be a good reflection of the future and that measures need to be put in place for the post-2020 period. While examining a number of approaches, it identifies free allocation as the most likely way forward for mitigating the risk of carbon leakage. While other approaches may provide interesting options, they also present challenges for implementation, from a market functioning, to international trade and relations, points of view. A number of challenges will need to be addressed in the post-2020 period, with many of them part of the EU ETS structural reform package. Some of these challenges include, among others, the need to recognise, and provide for individual sectoral characteristics, as well as for changes in production patterns, due to economic cycles, and other factors. Finally, the paper emphasises the need for an open dialogue regarding the post-2020 provisions for carbon leakage as no overall Energy and Climate Package is likely to be agreed on until this matter is addressed.

The Market Stability Reserve in Perspective. CEPS Special Report No. 91, October 2014

This Special Report aims to contribute to the debate on the Market Stability Reserve (MSR), which was introduced by the European Commission in a legislative proposal of January 2014. The MSR would introduce a degree of supply management into the EU Emissions Trading System (ETS). This report is the result of various meetings with ETS-stakeholders throughout 2014. It discusses the MSR’s rationale and reviews the different options available for its design, governance and timing, as well as its consequences for the functioning of the EU ETS and the EU’s climate and energy policy.

The Sustainability Impact of the EU Emissions Trading System on the European Industry. Bruges European Economic Policy (BEEP) Briefing 17/2007

This BEEP explains the mechanism of the EU Emissions Trading System (ETS) for the greenhouse gas carbon dioxide and explore into its likely sustainability impact on European industry. In doing so, it focuses on energy-intensive industries like cement, steel and aluminium production as well as on the emerging hydrogen economy. The BEEP concludes that at the moment it is still very inconsistently implemented and has a fairly narrow scope regarding greenhouse gases and involved sectors. It may also give an incentive to relocate for energy-intensive industries. In its current format, the EU ETS does not yet properly facilitate long term innovation dynamics such as the transition to a hydrogen economy. Nevertheless, the EU ETS is foremost a working system that – with some improvements – has the potential to become a pillar for effective and efficient climate change policy that also gives incentives for investment into climate friendly policies.

Market Efficiency in the EU Emissions Trading Scheme: An outlook for the third trading period. Bruges European Economic Research (BEER) Papers 20/March 2011

Is the EU Emission Trading Scheme (ETS) ready for the challenge of cutting emissions by 20 %? This paper tries to provide an answer to this question by studying the efficiency of the scheme, both in the secondary and in the primary markets for allowances. On the one hand, this paper draws conclusions from the operation of the scheme so far. For this purpose, it studies a wide variety of market data using economic and econometric techniques. On the other hand, building on this evidence, this paper presents and evaluates some of the changes introduced in the scheme for the third trading period.

Scanning the Options for a Structural Reform of the EU Emissions Trading System. CEPS Special Report 107, 19 May 2015

This paper provides a comprehensive overview and analysis of different options to reform the EU Emissions Trading System (ETS). The options discussed include changes to address the rigidity of supply on the auctioning side, as well as reforms to add flexibility to free allocation. Additionally, other options that may enhance the functionality of the EU ETS are covered, drawing on examples and practices in other carbon-pricing mechanisms around the world. It is crucial to note that any reform of the EU ETS must consist of a package of options. Taken separately, the options may very well have beneficial effects, but they would also leave intact clear imperfections in the current design. Specifically where the auctioning supply mechanism and the flexibility in free allocation are concerned, we assess multiple options in each category, and present evidence for each option. Where appropriate, we suggest complementing these reform options with additional elements (presented in section 3.3). The aim of any structural reform should be to arrive at a set of options that forms a consistent and credible package. With this paper, we provide an evidence-based assessment of the various building blocks of such a reform.

The Emission Trading Scheme reform: will the Commission's proposal save the system? EPC Policy Brief, 29 May 2015

The European Union’s Emission Trading Scheme (ETS), proposed by the Commission in 2001, entered into force in 2005. It was the flagship instrument of an ambitious policy aiming to reduce the emission of greenhouse gasses in the EU by making emission allowances a freely tradable ‘financial commodity’. However, in recent years, the cracks in the system have begun to show as the price of these CO2 emission allowances has dropped. In this Policy Brief, Jørgen Knud Henningsen argues that the envisaged ETS reform may not be enough to address the system’s shortcomings, and that there should be a more open discussion about its potential if it is to contribute to the EU’s goal of a largely de-carbonised economy by 2050.

Something Worth Fighting For: The Evolution of Lobbying Coalitions in the Emissions Trading System. Bruges Political Research Papers 50/2015.

This thesis attempts to understand who fought for influence within the European Union’s policy area of the Emissions Trading System (ETS). The ETS is a key aspect of the European Union’s (EU) climate change policy and is particularly important in light of the conclusions at the 2015 United Nations Climate Change Conference in Paris. It was first established in 2003 with Directive 2003/87/EC and completed its first major revision in 2008 with Directive 2009/29/EC. Between these two key Directives, the interplay between industrial and environmental incentives means that the ETS has created a dynamic venue for divergent interest groups. So as to identify the relevant actors, this paper applies the Advocacy Coalition Framework (ACF) of Sabatier. Using position papers, semi-structured interviews, and unpublished documents from the EU institutions, this paper answers it primary research question in its identification of an economy-first and an environment-first lobbying coalition. These coalitions have expanded over time with the environment-first coalition incorporating Greenpeace and the economy-first coalition expanding even further in both scope and speed. However, the economy-first coalition has been susceptible to industry-specific interests. In its application of the ACF, the research shows that a hypothesised effect between the ACF’s external events and these lobbying coalitions is inconclusive. Other hypotheses stemming from the ACF relating to electricity prices and the 2004 enlargement seem to be of significance for the relative composition of the lobbying coalitions. This paper finds that there are certain limitations within the ACF. The findings of this thesis provide a unique insight into how lobbying coalitions within a key EU policy area can form and develop.

TERT promoter mutations in pancreatic endocrine tumours are rare and mainly found in tumours from patients with hereditary syndromes

One of the hallmarks of cancer is its unlimited replicative potential that needs a compensatory mechanism for the consequential telomere erosion. Telomerase promoter (TERTp) mutations were recently reported as a novel mechanism for telomerase re-activation/expression in order to maintain telomere length. Pancreatic endocrine tumors (PETs) were so far recognized to rely mainly on the alternative lengthening of telomeres (ALT) mechanism. It was our objective to study if TERTp mutations were present in pancreatic endocrine tumors (PET) and could represent an alternative mechanism to ALT. TERTp mutations were detected in 7% of the cases studied and were mainly associated to patients harbouring hereditary syndromes. In vitro, using PET-derived cell lines and by luciferase reporter assay, these mutations confer a 2 to 4-fold increase in telomerase transcription activity. These novel alterations are able to recruit ETS transcription factor members, in particular GABP-α and ETV1, to the newly generated binding sites. We report for the first time TERTp mutations in PETs and PET-derived cell lines. Additionally, our data indicate that these mutations serve as an alternative mechanism and in an exclusive manner to ALT, in particular in patients with hereditary syndromes.

Sensitive Questions in Online Surveys: Experimental Results for the Randomized Response Technique (RRT) and the Unmatched Count Technique (UCT)

Gaining valid answers to so-called sensitive questions is an age-old problem in survey research. Various techniques have been developed to guarantee anonymity and minimize the respondent's feelings of jeopardy. Two such techniques are the randomized response technique (RRT) and the unmatched count technique (UCT). In this study we evaluate the effectiveness of different implementations of the RRT (using a forced-response design) in a computer-assisted setting and also compare the use of the RRT to that of the UCT. The techniques are evaluated according to various quality criteria, such as the prevalence estimates they provide, the ease of their use, and respondent trust in the techniques. Our results indicate that the RRTs are problematic with respect to several domains, such as the limited trust they inspire and non-response, and that the RRT estimates are unreliable due to a strong false "no" bias, especially for the more sensitive questions. The UCT, however, performed well compared to the RRTs on all the evaluated measures. The UCT estimates also had more face validity than the RRT estimates. We conclude that the UCT is a promising alternative to RRT in self-administered surveys and that future research should be directed towards evaluating and improving the technique.

A Stata implementation of the Blinder-Oaxaca decomposition

The counterfactual decomposition technique popularized by Blinder (1973) and Oaxaca (1973) is widely used to study mean outcome differences between groups. For example, the technique is often used to analyze wage gaps by sex or race. The present paper summarizes the technique and addresses a number of complications such as the identification of effects of categorical predictors in the detailed decomposition or the estimation of standard errors. A new Stata command called -oaxaca- is introduced and examples illustrating its usage are given.

Multinomial goodness-of-fit: large sample tests with survey design correction and exact tests for small samples

A new Stata command called -mgof- is introduced. The command is used to compute distributional tests for discrete (categorical, multinomial) variables. Apart from classic large sample $\chi^2$-approximation tests based on Pearson's $X^2$, the likelihood ratio, or any other statistic from the power-divergence family (Cressie and Read 1984), large sample tests for complex survey designs and exact tests for small samples are supported. The complex survey correction is based on the approach by Rao and Scott (1981) and parallels the survey design correction used for independence tests in -svy:tabulate-. The exact tests are computed using Monte Carlo methods or exhaustive enumeration. An exact Kolmogorov-Smirnov test for discrete data is also provided.

Trust and Reputation in Internet Auctions

Exchange between anonymous actors in Internet auctions corresponds to a one-shot prisoner's dilemma-like situation. Therefore, in any given auction the risk is high that seller and buyer will cheat and, as a consequence, that the market will collapse. However, mutual cooperation can be attained by the simple and very efficient institution of a public rating system. By this system, sellers have incentives to invest in reputation in order to enhance future chances of business. Using data from about 200 auctions of mobile phones we empirically explore the effects of the reputation system. In general, the analysis of nonobtrusive data from auctions may help to gain a deeper understanding of basic social processes of exchange, reputation, trust, and cooperation, and of the impact of institutions on the efficiency of markets. In this study we report empirical estimates of effects of reputation on characteristics of transactions such as the probability of a successful deal, the mode of payment, and the selling price (highest bid). In particular, we try to answer the question whether sellers receive a "premium" for reputation. Our results show that buyers are willing to pay higher prices for reputation in order to diminish the risk of exploitation. On the other hand, sellers protect themselves from cheating buyers by the choice of an appropriate payment mode. Therefore, despite the risk of mutual opportunistic behavior, simple institutional settings lead to cooperation, relatively rare events of fraud, and efficient markets.

WTO law issues of emissions trading

Based on existing research in the interface of emissions trading schemes (ETSs) and WTO law, the paper looks more closely at the design elements of an ETS that are most vulnerable to a WTO challenge, including border adjustment on importation and exportation, recycling of revenues and cross-border linking. The analysis of WTO consistency of various ETS regulatory components reveals significant legal uncertainty. One explanation is that an ETS is not yet fully established as a regulatory tool. It does not have a fixed design and its design elements vary significantly with a scheme. Moreover, ETS-related issues have never been raised in WTO disputes. This makes it hard to predict with confidence the outcome of scrutiny of an ETS by a WTO adjudicative body. In this respect, the availability of environmental and/or health exceptions for justification of ETS-related measures is of great importance.