Emission Trading Schemes

Monni S, Syri S, Pipatti R, Savolainen I. Extension of EU Emissions Trading Scheme to Other Sectors and Gases Consequences for Uncertainty of Total Tradable... 

The large scale adoption of PHEVs (or BEVs) in Europe might create a regulatory issue as electric vehicles will shift C02 emissions from the transport sector to the electric power sector, which - unlike road transport - is covered by the European Emissions Trading Scheme (ETS), a compensatory mechanism or the inclusion of road transportation within the scheme would be required. 

EROEI ETBE ETS EU EUCAR EUR Energy returned on energy invested Ethyl tertiary butyl ether Emission trading scheme European Union European Council for Automotive Research and Development Estimated ultimate recovery... 

For ships, the foreseen revision of Directive 2005/33/EC amending Directive 1999/32/EC should include stringent regulations for the sulphur content in marine fuels for certain areas. Furthermore, limits for NOx and PM emissions should be imposed, which are possible due to recent IMO amendments of MARPOL Annex VI. Also, Emission Control Areas should be enlarged to the extent possible. PM and NOx emissions of existing ships should be addressed e.g. via an emission trading scheme. 

ALLOCATIONS, INCENTIVES AND INDUSTRIAL COMPETITIVENESS UNDER THE EU EMISSIONS TRADING SCHEME... 

Allocation and competitiveness in the EU emissions trading scheme policy overview... 

The European emissions trading scheme (EU ETS) has an efficient and effective market design that risks being undermined by three interrelated problems the approach to allocation the absence of a credible commitment to post-2012 continuation and concerns about its impact on the international competitiveness of key sectors. This special issue of Climate Policy explores these three factors in depth. This policy overview summarizes key insights from the individual studies in this issue, and draws overall policy conclusions about the next round of allocations and the design of the system for the longer term. 

Although unprecedented in its scale and scope, the main pillars of the EU ETS were built on many years of economic research into theories of emissions trading, combined with practical experience of emission trading schemes principally in the USA. Yet the analogies are far from exact, and the emerging experience with the EU ETS is beginning to highlight the profound nature of the differences - many of which have thus far been under-appreciated in economic and policy analysis. 

In terms of economic scale, the European emission trading scheme is the biggest such scheme in the world by an order of magnitude. At allowances prices in the range 0-30/tC02, the value of... 

The repeated negotiations of allocations for subsequent periods create additional challenges for the European emission trading scheme. C02 budgets and allowance allocations are only determined... 

During 2006, the EU emissions trading scheme faces practical decisions in two key areas. The first is the allocation plans for the first Kyoto period of 2008-2012. The second is the conduct of a major review, to lay out options for continuing the system post-2012, and to signal how the Directive may evolve in that context. This part of the article addresses these two dimensions. 

For more information about Climate Strategies, the EU Emissions Trading Scheme study and work on national implementation, contact Beverley Darkin, Convenor, Climate Strategies Senior Research Fellow, Chatham House, bdarkin chathamhouse.org.uk, tel + 44 (0)20 7957 5741. 

Johnston, A., 2006. Free allocation of allowances under the EU emissions trading scheme legal issues. Climate Policy 6(1), 115-136. 

EC, 2005. Further guidance on allocation plans for the 2008 to 2012 trading period of the EU Emission Trading Scheme. European Commission, Brussels. 

The EU Emission Trading Scheme (EU ETS) has been hotly debated since the publication of the European Commission s Green Paper in 2000 (Commission of the European Communities, 2000). At the forefront of the debate are concerns that ... 

Bulow, J.I., Pfleiderer, P., 1983. A note on the effect of cost changes on prices. Journal of Political Economy 91, 182-185. Commission of the European Communities, 2000. Green Paper on Greenhouse Gas Emissions Trading within the European Union. Defra, 2004a. UK Announces Consultation on Draft National Allocation Plan for the EU Emissions Trading Scheme [available at www.defra.gov.uk]. 

A major characteristic of the present EU Emissions Trading Scheme (ETS) is that almost all the C02 allowances are allocated for free to the installations covered by the scheme. During the first phase of the EU ETS (2005-2007), more than 2.2 billion allowances of 1 tonne each are being allocated per year (EC, 2005). During the first phase of the EU ETS (2005-2007), more than 2.2 billion allowances of 1 tonne each are being allocated per year (EC, 2005), about 60% of which is allocated to the power sector. 

IPA Energy Consulting, 2005, Implications of the EU Emissions Trading Scheme for the UK Power Generation Sector, report to UK Department of Trade and Industry. 

Reinaud, 1,2005. Industrial Competitiveness under the European Union Emissions Trading Scheme. IEA Information Paper, Paris. 

The 25 national allocation plans (NAPs) established autonomously by the EU Member States (MSs) are central to the EU emissions trading scheme (ETS). According to Articles 9-11 and Annex III of the ETS Directive (2003/87/EC), NAPs must state how the total quantity of emissions allowances will be distributed to installations within their jurisdiction for each trading phase. The process of deciding the second phase allocation is currently under way. Each MS must submit their NAPs for 2008-2012 to the EU Commission by 30 June 2006. Over the subsequent 3-month period, these will be assessed by the Commission according to criteria outlined in the Directive. 

In our simplified model we assume that the highest prices are set by demand side response or open cycle gas turbines, followed by combined-cycle gas turbines with high variable and low fixed costs, and coal-fired power stations with low variable and high fixed costs. We compare two cases. First, the system is small relative to the EU emission-trading scheme and the EU C02 price is not affected by changes in national emissions of C02. Second, the model represents the entire EU ETS, and we set a fixed C02 budget and endogenously determined C02 price. 

Overall, an allocation based on a purely uniform benchmark creates the fewest distortions for both incumbents and new entrants. A similar approach for both facilities would increase transparency and avoid difficulties in defining what a new entrant is, relative to an existing facility (Entec and NERA, 2005). However, this does not suggest that it is desirable from an equity perspective, as power generators might receive free allowances above the level they require to cover any additional costs from the emission trading scheme. 

Entec andNERA, 2005. EU Emissions Trading Scheme Benchmark Research for Phase 2. DTI. 

The European GHG Emissions Trading Scheme (ETS) is the most important ETS worldwide and arguably the most important European climate change mitigation policy currently in place. 

Klepper, G., Peterson, S., 2004. The EU Emissions Trading Scheme Allowance Prices, Trade Flows, Competitiveness Effects. FEEM Working Paper 49.2004. 

Oxera, 2004. The European Emissions Trading Scheme Implications for Industrial Competitiveness. Report for the Carbon Trust. 

Reilly, J.M., Paltsev, S., 2005. An Analysis of the European Emission Trading Scheme. MIT, Joint Program on the Science and Policy of Global Change Report No. 127. 

Free allocation of allowances under the EU emissions trading scheme legal issues... 

The introduction of the EU s emissions trading scheme (EU ETS) was a highly significant development in EU and international environmental law. The Council and the European Parliament adopted the EU ETS Directive1 on 13 October 2003 and Member States were required to implement its provisions by 31 December 2003 (although the implementation process has in fact proved a rather more sedate affair than this short time-frame might have suggested). 

---