Transaction costs for firms in the EU ETS: lessons from Ireland

Until now, there has been little empirical evidence that EU Emissions Trading Scheme (ETS) transaction costs are incurred at firm level. The transaction costs (internal costs, capital costs, consultancy and trading costs) incurred by Irish firms under the EU ETS during its pilot phase (2005-2007) we...

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Bibliographic Details
Published in:Climate policy 2010, Vol.10 (2), p.190-215
Main Authors: JARAITĖ, JŪRATĖ, CONVERY, FRANK, DI MARIA, CORRADO
Format: Article
Language:English
Subjects:
Accounting
Allocations
Business management
Capital
Capital costs
Carbon emissions
climate policy
Commercial policy
Consultancy services
Cost analysis
Cost control
Costs
coûts de transaction
Economic models
Economic theory
Economies of scale
Efficiency
Emissions
Emissions control
Emissions trading
Empirical analysis
Enterprises
Environmental policy
European Union Emissions Trading Scheme
Government-business relations
Ireland
Irlande
Monitoring systems
Policies
politique climatique
Price supports
Quotas
Studies
Système d'échange européen de quotas d'émissions
Taxonomy
Transaction costs
échange de quotas d'émissions
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Summary:Until now, there has been little empirical evidence that EU Emissions Trading Scheme (ETS) transaction costs are incurred at firm level. The transaction costs (internal costs, capital costs, consultancy and trading costs) incurred by Irish firms under the EU ETS during its pilot phase (2005-2007) were measured and analysed. Evidence for the sources of transaction costs, their magnitude and the distribution of costs shows that these were mainly administrative in nature. Considerable variation in costs was found due to economies of scale, as the costs per tonne of CO 2 were lower for participants with larger allocations. For the largest firms-accounting for over half the emissions-average transaction costs were €0.05 per tonne. However, for small firms, average transaction costs were €2.02-over 18% of the current allowance price. This supports the concerns that transaction costs are excessive for smaller participants. The immediate policy implication is that additional attention will be needed to address different sizes of firms, number of installations per firm, and the size of the initial allocations.
ISSN:1469-3062
1752-7457
1752-7457
DOI:10.3763/cpol.2009.0659