Pricing carbon effectively: lessons from the European emissions trading system

The EU Emissions Trading System (EU ETS) is the world’s largest carbon market and has become a model for market-based approaches to reduce greenhouse gas emissions in other world regions. Evaluating and improving its effectiveness thus have been a concern not only for European policymakers but also for the success of carbon pricing policies at a global level. This policy brief begins with a review of the empirical evidence on the accomplishments of the EU ETS and concerns about industry competitiveness.