| dc.description.abstract | Climate change is one of the most pressing challenges of today's time and is addressed by political initiatives around the globe. A major attempt to reduce greenhouse gas emissions was made by the European Union when establishing the European Union Emissions Trading System (EU ETS) in 2005. Since its launch, it has undergone several phases, each having its own emission reduction target. This paper focuses on the 'Fit for 55' package, part of European Green Deal, which is the main policy initiative in Europe to become climate neutral by 2050. The thesis analyses the EU ETS until 2030 using a computable general equilibrium model and applies different policy scenarios. The main data are taken from the European Union Transaction Log, complemented and adjusted with published reports, directives and regulations from the European Commission. The thesis aims to investigate how different Market Stability Reserve design options impact the historical surplus of allowances in the market. Further, the needed allowances price to meet the emission reduction targets, represented by the cap, is simulated. One main finding is that the latest adopted Market Stability Reserve reform cannot fulfill its mandate to reduce the surplus substantially and permanently. The underlying obstacles are identified and supported by modelling results. In addition to that, the findings show that the allowances price has to rise considerably in the future. However, the current allowance price in 2023 already represents the necessary incentive to mitigate emissions. | eng |