Comparing options for ETS reform
Carbon Pricing, ETS
Sandbag has examined various options for adjusting the supply of allowances in Phase 4 of the EU ETS. Our analysis reveals that rebasing the cap to reflect the actual level of emissions at the end of Phase 3 is by far the most effective way of creating a more appropriate supply demand balance.
Increasing the linear reduction factor and reform of the MSR also have beneficial effects. These are not enough on their own, but can complement rebasing of the cap.