European Union emissions trading scheme

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

ERU ETS EU EUA EU ETS Emissions reduction unit Short for EU ETS European Union European Union Allowances The European Union Emissions Trading Scheme, specified by the Directive 2003/87/EC, and launched in January 2005... 

Carbon emissions from large stationary sources are more readily controlled than those from smaller, dispersed units. In Europe, the European Union Emission Trading Scheme (ETS) that aims to limit carbon emissions from these point sources was implemented on 1 January 2005. Individual plants are issued with permits which specify the level of carbon that each may emit annually. Companies with surplus permits may sell these to others who wish to exceed their respective allowances. At first, the scheme did not work well because the initial allocations were generous and the market price of permits was too low to be effective in curtailing emissions. In the next phase of the programme, permits could be restricted and their market value would then rise. As these regulations begin to bite and companies have to purchase additional permits on the open market at realistic prices, it may become financially attractive - if not actually required by law - to fit carbon-capture equipment to their exhaust stacks. 

Bloomberg (2006). European Union Emissions Trading Scheme Spot Prices. Bloomberg L.P. 

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. 

The European Union emission trading scheme saw a lot of price volatility in Phase 1. Many academics pointed out that much of the price volatility occurred because the program prevented the banking of allowances from the first phase to the second. Discnss why the banking of allowances over time may rednce price volatility in a cap-and-trade scheme. 

On 8 July 2008, the European Parliament voted to expand the European Union Emissions Trading Scheme to cover aviation emissions from January 2012. What the EU ETS broadly proposes is that operators be allocated allowances each giving them a right to emit 1 tonne of carbon dioxide per year. The total number of allowances allocates a limit on the overall emissions from the activities covered by the Scheme. By 30 April each year operators must surrender allowances to cover their actual emissions. Operators can trade allowances so that emissions reductions can be made where they are most cost-effective. 

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... 

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 growing number of OECD countries are implementing cap-and-trade schemes as key elements of their national climate policies In 2005, the European Union launched its Emissions Trading Scheme (EU ETS), which regulates about 10,000 facilities that currently emit around 2 Gt of CO per year (Skjaerseth and Wettestad, 2008). With a market value of US 50 billion, the EU ETS dominates the international carbon market, which totalled US 64 billion in 2007 (Capoor and Ambrosi, 2008). 

In the first case, governments can devolve trading activity to the level of companies in order to enhance carbon market efficiency, and trade only on behalf of sectors not covered by domestic emissions trading schemes ([Ql]Hahn and Stavins, 1999). In fact, this is the approach currently adopted by the European Union, where EU ETS allowances (EUAs) traded across national country borders correspond to Kyoto units (AAUs). Another design option relates to whether companies may or may not be allowed to trade with governments. According to economic theory this would be the most efficient option. ... 

The European Union will extend its emissions trading scheme (EU ETS) to cover international aviation emissions associated with flights to and from Member States beginning in 2012. It is planning to add international shipping emissions to the scheme in 2013. Other countries may also include international aviation and shipping emissions in their emissions trading schemes. 

Reuters reported on 11 September 2008 that the European Parliament s Industry Committee agreed that shipping should he included in the European Union s Emission Trading Scheme from 2013. 

Harrison, D.J., Radov, D.B., 2002. Evaluation of Alternative Initial Allocation Mechanisms in a European Union Greenhouse Gas Emissions Allowance Trading Schemes. NERA Report to DG Environment, European Commission, NERA. 

Harrison, D. and Radov, D. 2002. Evaluation of alternative initial allocation mechanisms in a European Union greenhouse gas emissions allowance trading scheme , report for DG Environment, March 2002. 

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