Cameron Hepburn

10 April 2007

Financial Times – European union should auction most CO2 permits, says study

Cameron Hepburn

European governments should auction most of the permits in the Union’s carbon dioxide emissions trading scheme, according to research by Oxford academics, writes Scheherazade Daneshkhu.

A study co-authored by Robert Ritz of Nuffield College, to be presented to the Royal Economic Society’s annual conference next week, said the plan to auction up to 10 per cent of the allowances in 2008-2012, with the rest distributed to companies free, amounted to a substantial subsidy.

The scheme was launched in 2005 to create a market for trading emissions. In the initial phase most permits were freely allocated to companies based on historical emissions.

The study argues that auctioning off permits in the second phase could be done without affecting profits and would also raise substantial government revenue.

Click here for access to study