FLM Debate: Long-term decarbonisation: can the EU-ETS do better?

Speaker

Marc Baudry is a Professor at the University of Paris Nanterre and Head of the CO2 Price and Low Carbon Innovation Program

Title 

Long-term decarbonisation: can the EU-ETS do better?

Abstract

Despite the marked increase in the price of carbon on the EU-ETS for several years, the European Commission has shown its willingness to reform the mechanism in order, among other things, to encourage the adoption of low-carbon technologies. This paradox can be explained by the distinction between short-term, reversible reductions and long-term investments in low-carbon, irreversible technologies. However, the latter are not only obtained by a significantly high price, but also by good visibility of the future trajectory of this price. The presentation first returns to the concept of a central carbon bank to ensure such visibility. But for regulated sectors to invest in technological change, viable low-carbon technologies still need to be developed. The presentation therefore then focuses on the elements of reform of the EU-ETS, or which are linked to it, likely to have a direct or indirect impact on low-carbon innovation. In this regard, particular attention is paid to the carbon border adjustment mechanism.

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