Credibility makes or breaks the price: political commitment in long-term climate policy key for effective EU emissions trading system
High policy credibility is crucial for carbon prices in the EU emissions trading system (EU ETS) to be high enough to efficiently incentivize emission reductions in the long term, a new study published in Nature Energy finds. A team of European Climate and Energy Modelling Forum researchers has shown that two consecutive ETS reforms elevated CO₂ prices from below 10 Euro per ton of CO2 in 2017 to about 80 Euro per ton of CO2 in 2022, not only by tightening the cap, but also by firming up political commitment to it. This effectively made firms act with more foresight, emitting less in the short term to store certificates for future use.
