Abstract
This paper aims to understand the impact of participating in the EU ETS on the emissions of Sweden and Denmark by studying the performance of industries with different marginal costs to abate under different policy scenarios. To do so, I construct a partial equilibrium model of allocating available permits using linear programming across different policy scenarios in Denmark and Sweden to understand both reductions in emissions caused due to carbon pricing policies and the evolution of the cost to emit for these industries. In particular, I use the cost of energy as a proxy for the cost to emit (or abate) to understand whether industries with a lower cost to emit, either due to a reliance on cheaper energy sources or carbon neutral fuels, are rewarded and whether this system leads to a reduction in the rate of emissions per unit output.