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Implementing greenhouse gas trading in Europe: lessons from economic literature and international experiences

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Author Info
Catherine Boemare () (CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts)
Philippe Quirion () (CIRED - Centre international de recherche sur l'environnement et le développement - CIRAD : UMR56 - CNRS : UMR8568 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Nationale du Génie Rural des Eaux et des Forêts)

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Abstract

The European Commission (2001a) has recently presented a directive proposal to the European Parliament and Council in order to implement a greenhouse gas emission trading scheme. If this proposal survives the policy process, it will create the most ambitious trading system ever implemented. However the legislative process is an opportunity for various interest groups to amend envi-ronmental policies which, as a result, generally deviate further from what eco-nomic literature proposes. A close look at implemented emission trading schemes, stressing their discrepancies with economic literature requests, is thus useful to increase the chances of forthcoming emission trading schemes to go through the political process. We thus review ten emission trading systems, that are either implemented or at an advanced stage of the policy process. We draw attention to major points to be aware of when designing an emission trading system: sectoral and spatial coverage, permits allocation, temporal flexibility, trading organisation, moni-toring, enforcement, compliance, and the harmonisation vs. subsidiarity issue. The aim is to evaluate how far experiences in emission trading move away from theory and why. We then provide some lessons and recommendations on how to implement a greenhouse gas emission trading program in Europe. We identify some pros of the Commission proposal (spatial and sectoral coverage, temporal flexibility, trading organisation, compliance rules), some potential drawbacks (allocation rules, monitoring and enforcement) and items on which further guidance is needed (monitoring and allocation rules). Lastly, the European Commission should devote prominent attention to the U.S. NOX Ozone Transport Commis-sion budget program, as the only example of integration between the federal and state levels.

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Paper provided by HAL in its series Post-Print with number halshs-00007264_v1.

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Date of creation: 2002
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Publication status: Published, Ecological Economics, 2002, 43, 2, 213-230
Handle: RePEc:hal:journl:halshs-00007264_v1

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Related research
Keywords: Emission trading; climate change policy; policy-making and implementation;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Michel Fouquin & Khalid Sekkat & J. Malek Mansour & Nanno Mulder & Laurence Nayman, 2001. "Sector Sensitivity to Exchange Rate Fluctuations," Working Papers 2001-11, CEPII research center. [Downloadable!]
  2. Don Fullerton & Gilbert Metcalf, 1997. "Environmental Controls, Scarcity Rents, and Pre-Existing Distortions," NBER Working Papers 6091, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Goulder, Lawrence H. & Parry, Ian W. H. & Williams III, Roberton C. & Burtraw, Dallas, 1999. "The cost-effectiveness of alternative instruments for environmental protection in a second-best setting," Journal of Public Economics, Elsevier, vol. 72(3), pages 329-360, June. [Downloadable!] (restricted)
    Other versions:
  4. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John K. Stranlund, 2006. "The Regulatory Choice of Noncompliance in Emissions Trading Programs," Working Papers 2006-7, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
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  2. Schleich, Joachim & Ehrhart, Karl-Martin & Hoppe, Christian & Seifert, Stefan, 2004. "Banning banking in EU emissions trading?," Sonderforschungsbereich 504 Publications 04-60, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
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  3. John Pezzey, 2003. "Emission Taxes and Tradeable Permits A Comparison of Views on Long-Run Efficiency," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(2), pages 329-342, October. [Downloadable!] (restricted)
  4. Wolfgang Sterk & Ralf Schüle, 2009. "Advancing the climate regime through linking domestic emission trading systems?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(5), pages 409-431, June. [Downloadable!] (restricted)
  5. Ehrhart, Karl-Martin & Hoppe, Christian & Schleich, Joachim & Seifert, Stefan, 2004. "The role of auctions and forward markets in the EU," Sonderforschungsbereich 504 Publications 04-59, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  6. L. Gangadharan & A. Farrell & R. Croson, 2005. "Investment Decisions and Emissions Reductions:Results from Experiments in Emissions Trading," Department of Economics - Working Papers Series 942, The University of Melbourne. [Downloadable!]
  7. Coria, Jessica & Sterner, Thomas, 2008. "Tradable Permits in Developing Countries: Evidence from Air Pollution in Santiago, Chile," Discussion Papers dp-08-51, Resources For the Future. [Downloadable!]
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  8. Philippe Quirion, 2004. "Prices versus Quantities in a Second-Best Setting," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(3), pages 337-360, November. [Downloadable!] (restricted)
    Other versions:
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