The Robert Schuman Centre for Advanced Studies (RSCAS), created in 1992 and directed by Stefano Bartolini since September 2006, aims to develop inter-disciplinary and comparative research and to promote work on the major issues facing the process of integration and European society. The Centre is home to a large post-doctoral programme and hosts major research programmes and projects, and a range of working groups and ad hoc initiatives. The research agenda is organised around a set of core

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... es and is continuously evolving, reflecting the changing agenda of European integration and the expanding membership of the European Union. Details of the research of the Centre can be found on: The Climate Policy Research Unit (CPRU) is a research group within the Robert Schuman Centre for Advanced Studies under the Loyola de Palacio Chair. The goal of the CPRU is to provide a reliable source for information and analysis of EU climate policy and a forum for discussion of research carried out in this area among government officials, academics and industry. The CPRU was established in 2010 at the initiative of Josep Borrell, President of the EUI and former President of the European Parliament, as a means of providing more focus to European climate policy developments. The director of the CPRU is Denny Ellerman, part-time professor at the RSCAS, and recently retired as a Senior Lecturer from MIT's Sloan School of Management. The CPRU works in collaboration with the energy and regulatory policy research groups of the Florence School of Regulation and Loyola de Palacio Chair and with the Global Governance Programme at the EUI. Abstract When industry compensation is offered to prevent relocation of regulated firms, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyze industry compensation rules proposed under the EU Emissions Trading Scheme, which allocate permits for free to carbon and trade intensive industries. We estimate that this practice will result in overcompensation in the order of €6.7 billion every year. Efficient allocation would reduce the aggregate risk of job loss by two thirds without increasing aggregate compensation.