Thesis advisor: Richard Tresch / As global warming became a more urgent issue, the European Union (EU) nations formed the EU emission trading scheme (EU ETS) to regulate carbon emissions. The EU ETS set upper limits for each EU nation’s carbon emission levels in three distinctive phases to gradually decrease the carbon emission levels to a targeted reduction level by 2020. Throughout the paper, I will focus on how independent variables such as accumulated reserves, allocated allowances, the total outstanding supply of carbon emission rights (CERs) in the market, the demand for CERs, energy consumption, and the required reduction amount by 2020 affect the price of CER and the ratio of verified emissions to the 2020 targeted upper limit. / Thesis (BA) — Boston College, 2016. / Submitted to: Boston College. College of Arts and Sciences. / Discipline: Departmental Honors. / Discipline: Economics.