The waterbed effect and the EU ETS

An explanation using the closure of Dutch coal fired power plants as example

Published: 22/02/2016

Using the example of a potential closure of all Dutch coal fired power plants, Ecofys studied how this perceived waterbed effect works and what the influence of the market stability reserve (MSR) introduced in the EU ETS will be on this waterbed effect. The study was commissioned by ENECO. The study concludes that the direct waterbed effect under the EU ETS, where emission reductions in the Netherlands automatically result in more emissions elsewhere at most takes places only partially. The waterbed effect related to the emission cap through time does take place, but the MSR dampens this effect and furthermore, this effect will be impacted by future political decisions about the surplus in the EU ETS. This exploratory study aims to give further insight into the effect of additional measures, like the closure of coal fired power plants, on the net CO2 reduction as well into the functioning of the EU ETS and the MSR.

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(Update June 2016: The study had originally been published in Dutch, but is now available in English.)

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