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The EU must allocate fewer emission allowances and stop making free allocations
Date:9/28/2009

dioxide emission allowances among themselves. The company must have an "emission allowance" for each ton of carbon dioxide that is emitted..

The price of an emission allowance is presently around 14per tonne of carbon dioxide. This is less than one-fifth of the Swedish tax on carbon dioxide. The EU decides the total number of emission allowances available to the market. At present there are just over 2 billion. Emission allowances in the market created by the EU.

The idea behind emissions trading is to meet a particular environmental target at least cost to society. When companies are allowed to trade emission allowances, those companies that face high costs in reducing their emissions will instead buy emission allowances from companies whose costs in taking measures are lower.

If, instead of emissions trading, all companies were forced to reduce their emissions by the same amount, it would be very expensive for some companies while it would hardly cost anything at all for others. The total cost to society would be higher than if there was emissions trading.


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Contact: Karin Backteman
karin.backteman@economics.gu.se
46-317-862-595
University of Gothenburg
Source:Eurekalert

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