Allocation, allocation, allocation! The political economy of the development of the European Union Emissions Trading System

The European Union's pioneering carbon Emissions Trading System, the EU ETS, has inspired countries around world to launch their own CO2 markets. This paper analyses evolution of ETS from a political economy perspective, emphasizing interaction economic principles and interests at pivotal moments, showing how each compromise changed scope for future design choices. We focus on allowance allocation issue, which provides window into complex tug-of-war between efficiency politics distribution. Our account highlights dynamic nature market reform, lessons that can help inform more stable effective markets in future. article is categorized under: Climate Economics > Mitigation Carbon Economy Policies, Instruments, Lifestyles, Behavior