How Effective Has the EU Emissions Trading System Been?
The EU Emissions Trading System (ETS) is Europe’s flagship policy for reducing industrial greenhouse gas emissions, covering around 45% of total EU emissions. This event will present new research by Frank Venmans and Anton Bogachev offering the most comprehensive causal assessment to date of the scheme’s impact across all four of its phases, and will discuss what the findings mean for the future of carbon pricing in Europe and beyond.
The EU ETS operates on a cap-and-trade principle: a declining cap is set on total emissions from covered installations, and companies must surrender one allowance for each tonne of CO₂ they emit. By steadily tightening the cap and allowing allowances to be traded, the system creates incentives for firms to invest in cleaner technologies and processes where reductions are most cost-effective.
Presentation
Frank Venmans and Anton Bogachev will present their new research assessing the causal effect of the EU ETS on industrial emissions between 2008 and 2023. Rather than simply observing that ETS-covered emissions have fallen, the study establishes what would have happened in the absence of the policy — the key counterfactual question at the heart of any policy evaluation.
To do this, the researchers compare ETS installations with similar non-ETS installations in the same sector and country, using detailed firm-level emissions data from France, the UK, the Netherlands and Norway. These four countries are uniquely suited to this analysis because, unlike most EU member states, they require companies to report emissions at thresholds well below the ETS inclusion criteria, providing a credible comparison group of unregulated firms.
The study finds that the ETS reduced industrial emissions by approximately 12% during Phase II (2008–2012), 18% during Phase III (2013–2020), and 41% during Phase IV (2021–2023) — a striking acceleration in effectiveness. Summing across all phases, the research estimates a total of around 4,000 million tonnes of CO₂ avoided between 2008 and 2023. The effects are consistent across sectors, with larger installations showing somewhat greater reductions than smaller ones.
Panel discussion
The presentation will be followed by a discussion exploring what explains the growing effectiveness of the EU ETS over time, including the role of tightening caps, the Market Stability Reserve, and rising carbon prices in recent years. Speakers will also consider the key risks to the scheme’s continued success — including political backlash and carbon leakage — and reflect on what the EU ETS experience tells us about the design of carbon markets elsewhere in the world. There will be ample opportunity for audience questions and discussion.
Speakers
Introduction by Mike Azlen, CEO of Carbon Cap and manager of the World Carbon Fund.
Frank Venmans is Associate Professor and Deputy Research Director at the Grantham Research Institute on Climate Change and the Environment, LSE. His research focuses on climate policy design under risk and uncertainty, with particular attention to technological change and inequality. He has published extensively on the EU ETS.
Anton Bogachev is a researcher at the International Energy Agency (to be confirmed).
How to attend
To join this in person event please register in advance here.