The structural determinants of carbon prices in the EU-ETS.

Summary The European carbon market (ETS) is the cornerstone of European climate policy. However, carbon prices have long been considered too low and volatile to trigger the investments needed for a sustainable decarbonization of the economy. Low price levels have largely been attributed to an imbalance in the supply of permits due to external shocks to the market. Several supply restriction measures, criticized in the first chapter, were thus undertaken in order to preserve the ETS. However, most prospective analyses of the EU ETS are based on an archetypal model of permit trading, which does not take into account the internal structure of the market or its fundamentals. This thesis thus aims to identify the structural determinants of the carbon price on the EU ETS, as well as to assess its impact on market equilibrium and supply-side policy design. Motivated by the examination of microeconomic transaction and emission data, the second and third chapters conduct an ex-post analysis of Phases 2 (2008-2012) and 3 (2013-2020) of the mechanism. They highlight the unstable nature of the internal market structure. In particular, transaction costs alter the spatial flexibility of the EU ETS, while technological progress destabilizes the emission cap. These observations lead us to question the interest of a carbon price floor to remedy these instabilities. A fourth chapter therefore conducts an ex-ante analysis of the ETS electricity sector in the presence of three price support mechanisms. Our results suggest that the ability of the RMS to rapidly reduce the number of permits in circulation does not justify such a mechanism in the short term.