An Economics Analysis of the EU ETS Emission Trading System

This paper provides a comprehensive economic analysis of the benefits, costs and complementary policies of the EU ETS emission trading system and study the effects of the emission trading system on emission reduction in 2007-2017. The paper discusses the advantages of the emission trading system by solving the environmental externality and emission leakage problem. The paper collects and analyzes data from the European Pollutant Release and Transfer Register (E-PRTR), and finds that implementing EU ETS system reduces emissions of CO₂, N₂O, CH₄, HFCs, PFCs, and SF₆. The paper ends by discussing the implications for building a global emission trading system.