How to avoid history repeating itself: the case for an EU Emissions Trading System (EU ETS) price floor revisited

The EU Emissions Trading System (EU ETS) is the cornerstone of EU climate policy, a grand policy experiment, as the first and largest international emissions trading system in the world. In this article, we seek to provide a broad overview of the initiation, decision-making and implementation of the EU ETS so far. We explore why the EU changed from a laggard to a leader in emissions trading, how it managed to establish the system rapidly, and the consequences to date, leading up to the 2008 proposal for a revised ET Directive for the post-2012 period. We apply three explanatory approaches, focusing on the roles of the EU member states, the EU institutions and the international climate regime, and conclude that all three approaches are needed to understand what happened, how and why. This also reveals that what happened in the early days of developing the system had significant consequences for the problems experienced in practice and the prospects ahead.

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Price Relationships in the EU Emissions Trading System

Green Finance and Sustainability ◽

10.4018/978-1-60960-531-5.ch012 ◽

2011 ◽

pp. 212-220 ◽

Cited By ~ 2

Author(s):

Julien Chevallier

Keyword(s):

European Union ◽

Emissions Trading ◽

Eu Ets ◽

The European Union ◽

Trading System ◽

Trading Scheme ◽

Price Relationships ◽

Eu Emissions Trading System ◽

Emissions Trading System ◽

The Eu

The European Union Emissions Trading Scheme (EU ETS) constrains industrial polluters to buy/sell CO2 allowances depending on a regional depolluting objective of -8% of CO2 emissions by 2012 compared to 1990 levels. Companies may also buy carbon offsets from developing countries, funding emissions cuts there instead, under a Kyoto Protocol Clean Development Mechanism (CDM). This chapter critically analyzes the price relationships in the EU emissions trading system. The United Nations Framework Convention on Climate Change (UNFCCC) delivers credits that may be used by European companies for their compliance needs. Certified Emissions Reductions (CERs) from CDM projects are credits flowing into the global compliance market generated through emission reductions. EUAs (European Union Allowances) are the tradable unit under the EU ETS. Besides, the EU Linking Directive allows the import for compliance into the EU ETS up to 13.4% of CERs on average. This chapter details the idiosyncratic risks affecting each emissions market, be it in terms of regulatory uncertainty, economic activity, industrial structure, or the impact of other energy markets. Besides, based on a careful analysis of the EUA and CER price paths, this chapter assesses common risk factors by focusing more particularly on the role played by the CER import limit within the ETS.

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Fixing the EU Emissions Trading System? Understanding the Post-2012 Changes

Global Environmental Politics ◽

10.1162/glep_a_00033 ◽

2010 ◽

Vol 10 (4) ◽

pp. 101-123 ◽

Cited By ~ 34

Author(s):

Jon Birger Skjærseth ◽

Jørgen Wettestad

Keyword(s):

Climate Policy ◽

Emissions Trading ◽

Eu Ets ◽

Trading System ◽

International Climate ◽

Energy And Climate Policy ◽

Eu Emissions Trading System ◽

Emissions Trading System ◽

The Eu ◽

International Climate Negotiations

This article explains why the significant changes in the EU Emissions Trading System (EU ETS) for the 2013–2020 phase were adopted in 2008. The combination of a more stringent EU-wide cap, allocation of emission allowances for payment, and limits on imports of credits from third countries have strengthened the system for the post-2012 period. This will promote reduction in greenhouse gases compared to the old system. The main reasons for these changes are, first, changes in the positions of the member states due to unsatisfactory experience with performance of the EU ETS so far. Second, a “package approach” where the EU ETS reform was integrated into wider energy and climate policy facilitated agreement on the changes. Third, changes in the position of nonstate actors and a desire to affect the international climate negotiations contributed to the reform.

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