Climate Economics with Arvid Viaene
A research-focused podcast on the economics of climate change and air pollution. Episodes are released every two weeks on Tuesday at 6 am CET. Episodes will be either expert interviews or solo explorations of key issues. Hosted by Dr. Arvid Viaene, a climate economist with a PhD from the University of Chicago. He has done research on the impacts of climate change on agriculture and mortality. His research on climate-related mortality has been published in The Quarterly Journal of Economics, and he has advised the European Commission on the impacts of climate policy on firm competitiveness.
Climate Economics with Arvid Viaene
#34 Dr. Frank Venmans - The EU ETS Compliance Puzzle: High Compliance, Low Enforcement
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What happens if firms simply do not comply with a carbon market?
In this episode, I speak with Frank Venmans about his paper “Policing Carbon Markets”, which studies compliance and enforcement in the EU Emissions Trading System.
The headline result is striking: compliance is extremely high, at around 99%. But the standard economic explanation — firms comply because they fear fines and enforcement — only explains a small part of what is happening.
We discuss:
- how high compliance is in the EU ETS
- why the first phase of the system looked very different
- the gap between theoretical fines and the fines actually collected
- how the paper tests whether firms are reporting emissions truthfully
- the role of verifiers, inspections, naming and shaming, and legal penalties
- the “Harrington paradox” of high compliance despite relatively limited enforcement
- why long-term relationships between firms and regulators may matter
- what newer carbon markets can learn from the European experience
The paper also highlights a less glamorous but very important lesson: carbon markets are technically complex. Registries, reporting systems, verification, financial regulation, and data management all matter enormously for whether the system works in practice.
Transcript: [TBD]
Paper: https://www.tandfonline.com/doi/full/10.1080/14693062.2025.2464699 , and
Frank Venmans: https://www.fvenmans.com/
For questions, comments or suggestions, you can contact me at arvid.viaene.ce@gmail.com