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The EU ETS is the cornerstone of the European Union’s climate policy. The EU ETS will play a decisive role in the European Union plan to meet its commitments under the Paris Agreement. In November 2017, following more than two years of negotiations, EU member states and the European Parliament reached a final agreement on the revision of the EU ETS for the period 2021–2030. The final agreement struck an important, ambitious balance on a number of measures designed to ensure that the EU ETS achieves its legislative aims of promoting emission reductions in a cost-effective manner. The negotiations also provide a number of policy lessons for future negotiations relating to the role of EU institutions and the rules for free allocation which will be important for the EU ETS to meet its legislative objectives. 1

The introduction of a carbon price through an emissions trading scheme such as the European Union's Emissions Trading Scheme (EU ETS) can create the risk of carbon leakage. The European Commission presented a list of sectors which were deemed to be exposed to a significant risk of carbon leakage in December 2009. The listed sectors receive a share of emissions allowances free of charge between 2010 and 2014 as a policy response to the risk of carbon leakage within industrial sectors covered by the EU ETS. This paper analyses the effectiveness of the Commission's carbon leakage list in achieving two important policy goals - ensuring the global competitiveness of certain industry sectors covered by the EU ETS whilst maintaining the efficacy of the EU ETS in reducing greenhouse gas emissions.