https://www.lse.ac.uk/granthaminstitute/events/how-effective-has-the-eu-...
The EU Emissions Trading System (ETS) is Europe’s flagship policy for reducing industrial greenhouse gas emissions, covering around 45% of total EU emissions. This event will present new research by Frank Venmans and Anton Bogachev offering the most comprehensive causal assessment to date of the scheme’s impact across all four of its phases, and will discuss what the findings mean for the future of carbon pricing in Europe and beyond.
The EU ETS operates on a cap-and-trade principle: a declining cap is set on total emissions from covered installations, and companies must surrender one allowance for each tonne of CO₂ they emit. By steadily tightening the cap and allowing allowances to be traded, the system creates incentives for firms to invest in cleaner technologies and processes where reductions are most cost-effective.
Presentation
Michael Azlen, the Founder and CEO of Carbon Cap Management will open the event with a brief presentation providing a description of how ETS work, the coverage of ETS globally including new countries that plan to launch ETS. In addition, Mr. Azlen will provide information on Carbon as a liquid and investable asset class and the role it might play in a diversified investor portfolio.
Frank Venmans and Anton Bogachev will present their new research assessing the causal effect of the EU ETS on industrial emissions between 2008 and 2023. Rather than simply observing that ETS-covered emissions have fallen, the study establishes what would have happened in the absence of the policy — the key counterfactual question at the heart of any policy evaluation.
To do this, the researchers compare ETS installations with similar non-ETS installations in the same sector and country, using detailed firm-level emissions data from France, the UK, the Netherlands and Norway. These four countries are uniquely suited to this analysis because, unlike most EU member states, they require companies to report emissions at thresholds well below the ETS inclusion criteria, providing a credible comparison group of unregulated firms.
Panel discussion
The presentation will be followed by a discussion exploring what explains the growing effectiveness of the EU ETS over time, including the role of tightening caps, the Market Stability Reserve, and rising carbon prices in recent years. Speakers will also consider the key risks to the scheme’s continued success — including political backlash and carbon leakage — and reflect on what the EU ETS experience tells us about the design of carbon markets elsewhere in the world. There will be ample opportunity for audience questions and discussion.
Speakers
Michael Azlen is CEO of Carbon Cap. Michael Azlen is an investment professional with 25 years of industry experience. After the sale of his previous business to a Swiss public company he focused on climate change research culminating in a deep focus on regulated carbon markets and the publication of an academic paper on carbon as a liquid and investable asset class. Based on this research, Michael formed Carbon Cap Management LLP as an environmental asset manager focused on carbon markets and climate impact and launched the flagship World Carbon Fund in February 2020. The Fund is now the largest carbon fund in the world at more than $600 million in size and invests into multiple liquid and regulated carbon markets. It has generated strong uncorrelated returns over its 6+ year track record with a direct impact on reducing carbon emissions. Mr. Azlen holds a Sloan Masters Degree in Leadership and Strategy from London Business School and is a Chartered Alternative Investment Analyst (CAIA) and has completed the LSE’s “Economics and Governance of Climate Change” course. Michael is a regular speaker at investment conferences and is has been a guest lecturer on the graduate degree programs at London Business School for the past 21 years.
Frank Venmans is Associate Professor and Deputy Research Director at the Grantham Research Institute on Climate Change and the Environment, LSE. His research focuses on climate policy design under risk and uncertainty, with particular attention to technological change and inequality. He has published extensively on the EU ETS.
Anton Bogachev is a researcher at the International Energy Agency (to be confirmed).
