EU ETS Revenue Allocation Strategy: A Potential Pathway Towards Net-Zero
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School of Business |
Bachelor's thesis
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Date
2022
Department
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Mcode
Degree programme
(Mikkeli) Bachelor’s Program in International Business
Language
en
Pages
82
Series
Abstract
Objectives The main objectives of this study were to explore the various ways in which EU ETS revenues are currently being spent by EU member states, in addition to the role that these funds may have in a carbon neutral transition. Through this exploratory analysis, connections are drawn between EU ETS revenues to the political economy and climate infrastructure funding. This study sets to highlight potential areas where these revenues can be applied in the pursuit of a carbon neutral economy, as underlined by the European Green Deal. Summary A strategic use of EU ETS revenues may have several implications within the transition to carbon neutrality. For instance, these revenues may incentivize consumer behavioral change and reward citizens for policy participation. This is as a provision of ETS revenues may increase the transparency of climate policies and provide tangibility to otherwise slowly progressing measures. In addition to this, ETS revenues may accelerate and influence the rate of clean innovation for industry. These revenues may also incentivize carbon-intensive farmers to switch to agroforestry or indoor practices which can have extended merits for natural sequestration. The deployment rates and scalability of carbon, capture & storage technologies and low-carbon transportation may also be increased by these revenues. Moreover, targeted EU ETS revenue spending may be able to protect vulnerable households from regressive carbon prices and ensure a just transition. However, given the novelty of these implications, substantial empirical evidence will be required to understand how various stakeholders respond to the information signals and fiscal support provisioned by EU ETS funds. Conclusions A strategic use of EU ETS revenues can have significant implications for accelerating the transition to carbon neutrality, if utilized as a complimentary policy tool within a broader policy mix. These funds may in large be used as a political tool and as a measure to accelerate climate infrastructural needs. Substantial empirical research will be needed to understand the specific role of EU ETS revenues within the transition to carbon neutrality.Description
Thesis advisor
Decker, ChristopherKeywords
climate, carbon market, European Union, carbon neutrality