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... bedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We examine under which conditions a cap-and-trade mechanism can deliver a dynamically efficient abatement pathway and contribute to a robust investment framework. For this we develop a numerical dynamic partial-equilibrium model that includes differentiated objective functions of different market participants for holding emission allowances based on their banking strategy. If the surplus of allowances is large, as currently observed in the European Union Emissions Trading System, the equilibrium market outcome can deviate from an efficient abatement pathway and performance of the policy is reduced against a set of key criteria (dynamic efficiency, price credibility, price consistency, and robustness to shocks). The model is applied to assess design options of quantity and price based market stability reserves as discussed in Europe. Both price and quantity based mechanisms can improve the performance of the EU ETS against key criteria. JEL Codes: D84, G18, Q48 Acknowledgement: We are grateful for financial support from Stiftung Mercator for a model comparison exercise on the Market Stability Reserve and to the EUREEM project funded by the German Federal Ministry for Economic Affairs and Energy (BMWi).