Is there a macroeconomic carbon rebound effect in EU ETS?

Date

2023-09-01

Author

Bolat, C. Kaan
Soytaş, Uğur
Akınoğlu, Bülent Gültekin
Nazlioglu, Saban

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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This study examines the macroeconomic carbon rebound effect for the European Union (EU) Emissions Trading System (ETS) by using data for the 2005–2019 period for 26 European countries. We estimate the panel data models which link emissions to allowances by controlling for economic growth, investment, employment, and energy intensity. The results from both the recent panel estimation approaches and Granger causality analysis indicate a macroeconomic carbon rebound effect of the EU ETS. The bidirectional Granger causality between emissions and allowances highlights a self-enforcing macroeconomic rebound. Energy intensity significantly impacts emissions directly and indirectly via the macroeconomic rebound effect. Our results show that positive economic spillovers of ETSs may hamper the efforts to meet climate targets.

Subject Keywords

Carbon rebound effect, ETS, EU, panel data

URI

https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85166155730&origin=inward
https://hdl.handle.net/11511/104948

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Graduate School of Natural and Applied Sciences, Article