As the European Union contemplates new policies aimed at meeting its emissions-reduction commitments under last year’s Paris Agreement on climate change, a new study by researchers at MIT, CAWM and ZEW could provide some valuable guidance on the most effective strategy.

Prof. Andreas Löschel, institute director at CAWM and Research Associate at ZEW, together with researchers from MIT and ZEW, shows that the EU could achieve the same results for CO₂ emission reduction as with efficiency standards, at far lower cost to the economy, by simply extending their existing emissions-trading system to encompass transportation rather than just electricity generation and energy intensive industry.

Including the transportation sector into the existing emission trading system will lead to substantial cost savings for both tax payers and the economy and could be a great possibility to fix the growing emissions from the transport sector in the European Union.