Zeitschrift für Energiewirtschaft

According to economists, greenhouse gas emissions can be reduced in the most cost-effective way by augmenting the European emissions trading system (ETS), that is, by integrating those sectors into the ETS that are not included so far, such as the transport and the agricultural sector. This augmentation, however, requires a uniform consensus among all EU Member Countries. As long as there is no such consensus, to provide incentives for reducing greenhouse gas emissions, Germany may contemplate introducing a CO2 price in the non-ETS sectors. In principle, this could be achieved either by raising a national CO2 tax in the non-ETS sectors or by a unilateral opt-in of the non-ETS sectors in the ETS. While both alternatives have pros and cons, the most important deficit of a CO2 tax is that it cannot ensure that a given emission target can be reached. In contrast, by construction, the ETS allows for precisely achieving any predetermined emissions cap.