The European Emission Trading Scheme: stakes of the passage to phase 3. Les Cahiers de la Chaire Economique du Climat nr 14, March 2012

The authors try to identify conditions of success for the passage to phase 3 of the European Union Emission Trading Scheme (ETS) during the period 2013-2020. They first draw historical lessons from eight years of operation of this scheme which reveal an extraordinary sensitivity of the market to any, even moderate, change in offer and demand conditions. Using the ZEPHYR-Flex model, they report an assessment of the different interventions made by public authorities to make market quota prices increase. These simulations highlight the risk of a transfer of difficulties to the future by somehow more blurring the visibility which actors generally needs on the long term. They finally draw lessons from the monetary policy while sketching what could be the mandate of an independent regulation authority in charge of the dynamic management of emission permit offer, and which would ensure an optimal articulation between the different time horizons of the climate strategy.