ABSTRACT
In standard markets of goods and services, suppliers tend to attentively observe and investigate the demand side. This chapter explains how corporations build strategy and take positions in economic environments and markets, which remains also valid in emission permit markets. It follows with industrial firms’ reactions to pricing carbon emissions. The chapter reveals why the theoretical proposition of price induced technological innovation is unlikely to materialize in practice. In this chapter, it is argued that one should not confuse marginal cost pricing with ‘fringe pricing’ and that the conditions for the ‘independence property’ are not met by the EU emissions trading systems (ETS). It takes a brief look at the increase in EU ETS permit exchange prices, from around €5/permit before 2018 to an average €25/permit since the second semester of 2019. Finally, the chapter provides concluding considerations and also juxtaposing reality and discourse on carbon pricing.
