Dóra Fazekas Carbon Market Implications for new EU - UniCredit ...

associations approached supported the selection of three or four reference points in their own
industries. Non-governmental organizations would support appraisals based on expected
production, while governments would rather see appraisals based on recent or standardized
production. Representatives of the sectors approached for this dissertation would, for the most part,
support the kind of benchmark-based allocation that would recognize prior emissions-reductions
and would provide a further motivation for continuing to do so in the future. In the author’s
opinion, it would certainly be worthwhile to consider the introduction of benchmarks, even despite
technical difficulties.
The only way to prevent moves which would work to counter reductions is to shift toward a policy
of distributing allowances for a price, which is also what the European Commission believes is the
correct approach (European Commission, 2008). It is the author’s opinion that allocating
allowances for cost would compel Hungarian companies to realize the opportunity costs of
emissions allowances. This, as discussed already, did not happen when the allowances were
allocated for free, even though the relevant economic theory would have dictated otherwise. The
allocation of allowances for a price would lead to companies’ emissions decisions being made not
according to the number of allowances made available, but according to their price, thereby forcing
companies to make profit-maximizing decisions.
Those interviewed for this dissertation had reservations about auctioning; claiming it is unfair and
explaining that they had trouble understanding the process. It is not surprising that the only two
exceptions to this point of view were the representatives of the power plant and oil company
mentioned above; they were the only ones to recognize the opportunity costs of emissions
allowances and thus to factor these into their decisions. Both emphasized that only a system where
all allowances are allocated through auctions can bring competitive balance to the system; as the
chief economist of the oil company put it, “auctioning is the only intellectually permissible method
of allocation” (Varró, 2008). The author concurs with this opinion – the revenues from auctioning
have to be recycled into the system and have to be used to reduce emissions. This would be
beneficial for the country’s economy on the whole, and could balance out other distortional effects
or forces, which would create competitive disadvantages.
* * *
One of the conclusions of the survey conducted for this dissertation is that Hungarian companies
tended to pursue a strategy of cost-minimizing (rather than profit-maximizing), as far as their
participation in the EU ETS during 2005-2007 was concerned. The companies would have been
able to increase their profits above all by reducing their emissions, amassing an emissions
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