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ABSTRACT. The European emissions trading scheme (EU ETS) is the centerpiece of Europe’s climate policy. The system has been undermined variously by the weakness of its regulation, an undesirable overlap with other public policies and the far-reaching economic and financial crisis that caused the market price of allowances to plunge. This article attempts to identify the conditions for making the coming years of the EU ETS a success. It draws historical lessons from the eight years the scheme has been in operation, and then analyzes, using the ZEPHYR-Flex model, the various interventions by the public authorities currently under discussion in order to revive the market. These simulations reveal the risk of carrying forward problems to the future, with further clouding of the visibility needed by ETS actors in the long term. Finally, the article proposes to draw lessons from monetary policy by outlining what might be the mandate of an Independent Carbon Market Authority, with responsibility for the dynamic management of the supply of allowances, and whose main mission would be to ensure the optimal linkage between the different temporal horizons of the climate strategy. pp. 53–68
JEL codes: Q54; E52

Keywords: emission trading; EU ETS; governance

How to cite: de Perthuis, Christian, and Raphael Trotignon (2014), “Improving Carbon Markets Governance: What Can We Learn from the EU Emission Trading Scheme,” Journal of Self-Governance and Management Economics 2(4): 53–68.

CHRISTIAN DE PERTHUIS
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Paris-Dauphine University, France
RAPHAEL TROTIGNON
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Paris-Dauphine University, France
(corresponding author)

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