Ricerc@Sapienza

The EU emission trading system (EU-ETS) set in 2005 is still, by far, the widest emissions trading scheme in the world. It is designed as a classical cap-and-trade system specifying a maximum amount of cumulated greenhouse gas emissions and allocating tradable allowances to firms covered by the scheme. Allowing trade in these permits results in a market price for allowances. The price provides an economic signal of which mitigation measures are worthwhile. A cap-and-trade system is by design effective in keeping the emissions of the participating installations below the cap.
The EU ETS is considered central to achieving the EU¿s climate policy goal of at least an 80 percent reduction in GHG emissions (relative to1990 levels) by 2050.
Unlike traditional commodities, which at some point during their market exchange must be physically delivered to someone, carbon credits do not represent a physical commodity but instead have been described as a legal fiction that is poorly understood by many sellers, buyers and traders. This lack of understanding makes carbon trading particularly vulnerable to fraud and other illegal activities. Carbon markets, like other financial markets, are also at risk of exploitation by criminals due to the large amount of money invested, the immaturity of the regulations and the lack of oversight and transparency.
In this vein, the contribution of this research project is twofold. On the one hand, we intend to shed some light on the effects of the EU ETS at firm level by studying the effectiveness of the ETS during its three evolution phases, and the impact that it is has exerted on companies performance. On the other hand, we aim to devise some tools to measure the degree of vulnerability present in the carbon market. Finally, suggestions will be provided on potential involvement of or interventions by the EU or single Member States in building up new regulation frameworks and allowing for a more effective compliance.