1. Venmans Frank UMons

2. Carbon intensive big companies, 40% of EU emissions Cap and trade 2005-2007 99,8% free allocation 2008-2012 97% free allocation Cap -6,5% compared to 2005 emissions 2013-2020 50% free allocation and declining Cap in 2020 -20% compared to 2005 emissions

3. Policy evaluation by nature normative 4 main criteria (IPCC 2007), Environmental effectiveness Cost-effectiveness and cost-efficiency Distributional effects Institutional feasibility Other authors use same criteria (among others) (Baldwin 2008, Harrington et al. 2004, Konidari & Mavrakis 2007, Mickwitz 2003, Mundaca & Neij 2009, Goers et al. 2010) Criteria also justified by debates in public arena Literature review to increase external validity

4. Abatement (decline in emission) Over-allocation Predictability of environmental impact Environmental side-effects : carbon leakage

6. Cost efficiency Marginal social cost of carbon> marginal abatement cost Cost effectiveness Equal marginal abatement cost across firms Distortional incentives of free allocation Updating New entrants reserves Closure withdrawals Transaction costs Dynamic cost-efficiency: innovation Effect of carbon price volatility on low carbon investments Too much on intermediate technologies, too little on high-end abatement technologies

7. Transfers between countries and sectors Social distributional effects Windfall profits

8. AuthorSectorCarbon price (€/t CO 2 ) Cost pass-throughWindfall profit (€billion/year) Sijm et al. (2008)Electricity, EU2038% to 182% €24 to 28 B/year Lise et al. (2010)Electricity, EU 202070 to 90% €24-35 B/year Keppler & Cruciani (2010) Electricity, EU12100% exogenous€19 B/year Kara et al. (2008)Electricity, Fi, No, Sw 10 100% exogenous€0.34-0.45 B/year for Fi €1.7 B/year for No and Sw Oberndorfer (2009) Veith et al. (2008) ElectricityCarbon price significant positive effect on stock prices Smale et al. (2006) Hourcade et al. (2008) Demailly & Quirion (2008) Steel, Cement…50% or more

9. How the ETS gained support among the European Commission, industry and certain NGO’s Technical complexity of trading The ambigual effect of free allocation on political acceptability

10. Environmental effectiveness: + Economic efficiency: in the future + Cost-efficiency: - Cost-effectiveness: + and – Transaction costs: 0 to – Dynamic efficiency: - Distributional effects: - - Institutional feasibility: +

12. AuthorsEstimated abatementSector & countryMethodology Ellerman & Buchner (2008a) 50 to 100 Mt/yearAll sectors in EUBAU counterfactual based on NAPs Ellerman, Convery, de Perthuis (2010) 70 Mt/yearAll sectors in EUBAU counterfactual based on UNFCCC emissions Anderson & Di Maria (2010) 58 Mt/year (mean)All sectors in EUBAU counterfactual based on Eurostat aggregate emissions Delarue et al. (2010)59 to 88 Mt/yearElectricity in EUFuel switch model Ellerman and Feilhauer (2008) 29 Mt/year (-6%)All sectors in Germany BAU counterfactual based on NAP 25 Mt/year (-5%)BAU counterfactual based on UNFCCC 4.4 Mt (-1%)Electricity in GermanyFuel switch model McGuiness & Ellerman (2008) 13 to 21 Mt/yearElectricity in UKFuel switch model

13. AuthorsCarbon price (€/t CO 2 ) PolicyCost pass-through Leakage & competitiveness loss Demailly & Quirion (2008) 20 (mean)57% free allocation 75% in EU 50% for export Exogenous EBITDA constant European output -1% Imports +2.5% Exports -2% Hourcade et al. (2008) 30Auction50% Exogenous EBIT from 15% to 10% Import ratio from 17% to 18% Smale et al. (2006)15100% free allocation 65% Endogenous EBITDA + 12% Output -2.1% FitzGerald et al. (2009) US price has significant influence on domestic price in 5 out of 7 countries Leakage exposure high Low cost pass-through Low scope for energy efficiency High share of energy expenditures