EU ETS effects on emissions of European Union industries

Abstract

This article contributes to the literature by analyzing how has the EU ETS allowance price affected the CO2 emissions of the EU industries, analyzing eight economic activity sectors for the three EU ETS phases (2005-2020). Estimations were performed using both a sample of 33 and 23 European countries through panel estimations. From the results, it was inferred that only in the sectors manufacture of paper and paper products (mpp) and manufacture of other nonmetallic mineral products (monmp) the impact of CO2 allowances prices has lead to the reduction of emissions intensity significantly, meaning that they reduce the emissions amount whenever the price of these allowances goes up. Therefore, the effect of allowances prices on emissions intensity is heterogeneous among sectors and the implementation phase of the EU ETS is relevant to explain emissions intensity reductions (phase 3) or increases (phases 1 and 2). Policymakers, thus should devote more attention to the other sectors where prices do not reveal a negative nor significant impact on emissions intensity.