EU Greenhouse Gas Emission Trading

The EU greenhouse gas emission trading scheme constitutes a pathbreaking new chapter in EU environmental law and policy. It is the first continent-wide cap-and-trade scheme that has been put in place and several aspects of the implementation of the scheme created a formidable challenge for authorities at European and national level. Never before has an EU environmental policy created an economic asset whose annual value runs into the tens of billions of Euros and has set up a process of shared tasks among the European and national levels to organise the distribution of these valuable assets to private economic actors. 

The challenges discussed so far are predominantly of a technical nature. The EU greenhouse gas emission trading scheme is the first application of this environmental policy instrument at EU level and few Member States had previously implemented or considered the use of the instrument at national level.10 Therefore neither authorities charged with the task to develop the allocation plan nor stakeholders involved had much experience with an allocation process.11 This relative inexperience made the process design (see next point) even more challenging. In many cases know-how gaps had to be addressed as a first step towards... 

The first allocation of allowances in the context of the introduction of the EU greenhouse gas emission trading scheme created an economic asset in the European economy with an annual value of some 22 to 44 billion.19 Hence another way of looking at the allocation process is through the lens of distributing an economic asset of that... 

The fact that this was the first allocation round marks a contrast of the EU greenhouse gas emission trading scheme with other cap-and-trade schemes that have been implemented so far. In the American SO2 allowance trading scheme for example the allocation is of a... 

The only certain factor at this stage is that a second allocation round will take place with notification of allocations plans to the Commission by 30 June 2006. Beyond the second allocation round many options are possible. As part of the review of the Directive launched in mid-2006 the legal framework may be changed substantially. So one will have to see to what extent the periodic and decentralised nature of the allocation process will exist beyond 2012. One thing is for sure however that the allocation of allowances in the EU greenhouse gas emission trading scheme will continue to stimulate a lot of debate and deliver rich material for books like this one. 

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]. 

European Commission 2000. Green paper on greenhouse gas emissions trading within the European Union , COM(2000) 87, March 2000. Point Carbon 2001. Towards EU-wide emissions trading Politics, design and prices , The Carbon Market Analyst, 25 September 2001. 

In this context, pressures to implement greenhouse gas (GHG) mitigation measures have had a top-down character in that they originated from international agreements, the Kyoto Protocol, and the EU Directive on Emissions Trading. 

Harrison, D. and Radov, D. (2002). Evaluation of Alternative Initial Allocation Mechanisms in a European Union Greenhouse Gas Emissions Allowance Trading Scheme, National Economic Research Associates, prepared for DG Environment, European Commission, http //europa.eu.int/comm/environment/ climat/pdf/allocation.pdf... 

EU (European Union), 2008, Proposal for a Directive of the European Parliament and of the Council Amending Directive 2003/87/EC so as to Improve and Extend the Greenhouse Gas Emission Allowance Trading System of the Community, 16723/1/08,13 December, Brussels. 

Representing an essential function to trade, logistics is a complex system made up of a multitude of players and interrelationships between suppliers, manufacturers, logistic service providers and the retailers whose job it is to deliver to the end user the product or service required under the best economic, social and environmental conditions. Meanwhile, its impact on the environment is important because of the many forms of pollution generated by road transport the major delivery mode used today. The transport sector consumes 70% of all petrol consumed in the EU and produces 21% of all greenhouse gas emissions. At the same time, it is well recognized that transport is the very life blood of a modern economy and its effects go far beyond the direct economic effects of employment and the added value of the transport sector in an economy. 

The analyses and discussions about the emission target took place on the basis of national greenhouse gas inventories and corresponding projections. The fact that a share of industry would not be included in the emissions trading system on the one hand, and that a number of plants from other sectors (commerce/trade/services) would fall under the scope of the EU ETS on the other hand, was not taken into account at first. 

The three initiatives discussed have been less trailblazing in addressing some of the other design features that are unique to greenhouse gas trading. For example, although the EU ETS covers a broader array of sectors, it still covers less than half of Europe s COj emissions. In particular, it does not... 

With estimated economic damage of about US 85 for each ton of carbon dioxide, capping greenhouse gas (GHG) emissions and putting a price tag on them becomes inevitable. Indeed, under the European Union emissions trading scheme (EU ETS), such a setup is already in effect for certain industries. Similar schemes are popping up across the United States in separate groups of states and in other major industrial economies worldwide. 

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