Study: Will the energy-intensive industry profit from EU ETS under Phase 3
Recently CE Delft has published a new study Will the energy-intensive industry profit from EU ETS under Phase 3? on the potential of cost-pass-through of freely obtained allowances by energy intensive industries in the EU ETS. This study puts into perspective the earlier obtained empirical results that energy intensive industries passed through the costs of freely obtained allowances into product prices between 2005 and 2009.
The new study concludes that the likeliness that energy intensive industry will pass through opportunity costs of emission allowances into product prices is even higher in Phase 3 of the EU ETS due to the stimulus for innovation that is built into the system. The study restates the conclusions of the earlier empirical work that free allocation does not seem an appropriate mechanism to tackle eventual carbon leakage but merely generates windfall profits in energy intensive sectors.