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Climate-conscious consumers and the buy, bank, burn program

Nature Climate Change volume 9, pages 431–433 (2019)Cite this article

Manipulation of European Union emission trading systems (ETS) by the buy, bank, burn program compensates unregulated emissions while regulated sectors carry a large part of the burden. This distorts the balance between regulated firms and non-regulated projects, so parties outside the EU ETS can be virtuous at the cost of others.

A substantial fraction of global CO2 emissions is not covered by emission trading systems (ETSs). In the European Union, for instance, only 45% of greenhouse gas emissions are regulated by EU ETS, the flagship European climate policy, and notable unregulated sectors include agriculture, road transportation and flights outside the European economic area1. Reducing emissions by non-ETS parties can come about in two ways: abatement outside ETS through emission reduction projects, for example, reducing highway speed limits or substituting bikes for cars; and abatement through the ETS by buying allowances from it and annihilating them, a practice we call ‘buy and burn’. As of 2018, the rules in EU ETS have changed, temporarily suppressing the effectiveness — that is, the decrease in aggregate emissions per unit of permits burned — of traditional carbon burning. Yet the new rules also open up possibilities for strategic programs, leveraged to more than 100% effectiveness.

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References

  1. The EU Emissions Trading System (EU ETS) (European Comission, 2016); https://ec.europa.eu/clima/sites/clima/files/factsheet_ets_en.pdf

  2. Erbach, G. Post-2020 reform of the EU Emissions Trading System (European Parliamentary Research Service, 2017).

  3. Gerlagh, R. & Heijmans, R. J. R. K. Regulating Stock Externalities CESifo Working Paper No. 7383 (CESifo, 2018).

  4. Perino, G. Nat. Clim. Change 8, 262–264 (2018).

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Acknowledgements

The authors thank A. Callahan-Brandt for textual corrections. R.G. thanks the Research Council of Norway for financial support.

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Authors and Affiliations

  1. Tilburg University, Tilburg, The Netherlands

    Reyer Gerlagh & Roweno J. R. K. Heijmans

  2. Oslo Centre for Research on Environmentally friendly Energy, Oslo, Norway

    Reyer Gerlagh

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  1. Reyer Gerlagh
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  2. Roweno J. R. K. Heijmans
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Correspondence to Roweno J. R. K. Heijmans.

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Competing interests

Reyer Gerlagh is a member of the Advisory Council (RVA) of Carbonkiller, the Dutch allowance burning program.

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Journal peer review information: Nature Climate Change thanks Grischa Perino and other anonymous reviewer(s) for their contribution to the peer review of this work.

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Gerlagh, R., Heijmans, R.J.R.K. Climate-conscious consumers and the buy, bank, burn program. Nat. Clim. Chang. 9, 431–433 (2019). https://doi.org/10.1038/s41558-019-0482-0

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