Effectiveness of the Emission Trading System in Promoting Decarbonization: Implications for Policy

The European carbon market is one of the most important measures to tackle climate change and reduce emissions in an economically efficient way. While scholars have published several studies on the functioning of carbon markets evaluating different features, from the effectiveness in terms of environmental impact to the risk of carbon leakage, we aim to provide an indicator to assess the effectiveness of the European Emission Trading System with reference to manufacturing in Germany, France, Italy, Spain, the Netherlands, and Poland. We calculated the incidence of the ETS using a min-max normalization approach. The policy implications of our work lie in the fact that information of this type is helpful for an assessment of the effectiveness of the system for fine-tuning purposes and for comparison reasons with other systems such as the carbon tax that is one a prominent debate on forging strategies to the transition toward a climate-neutral economy.