Review of Policy Research, published online 03.05.2019. DOI: 10.111/ropr.12345
The reform of the EU Emissions Trading System (ETS) adopted in November 2017 was surprisingly strong, given the previous opposition from central member-states like Poland and key stakeholders like the energy-intensive industries. The carbon price has also increased substantially since then. To explain why such major reform was possible, we present several findings with wider relevance. Importantly, all the actors pushing for a more ambitious reform benefitted from having a central, "second-best" mechanism in place - the Market Stability Reserve (MSR) - which could be further tightened. By focusing cancelation on allowances in the MSR and taking place only after 2023, policy entrepreneurs managed to make the distribution of costs obscure and diffuse, whereas the benefits (a probable higher carbon price and related greater auctioning revenues for member-states) were more specific and closer in time. That is what we call "smokescreen politics."