Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy
AbstractIn 2005, the European Union introduced the largest and most ambitious emissions trading program in the world to meet its Kyoto commitments for the containment of global climate change. The EU Emissions Trading Scheme (EU ETS) has some distinctive features that differentiate it from the more standard model of emissions trading. In particular, it has a relatively decentralized structure that gives individual member states responsibility for setting targets, allocating permits, determining verification and enforcement, and making some choices about flexibility. It is also a “cap-within-a-cap,” seeking to achieve the Kyoto targets while only covering about half of EU emissions. Finally, it is a program that many hope will link with other greenhouse gas trading programs in the future—something we have not seen among existing trading systems. Examining these features coupled with recent EU ETS experience offers lessons about how cost effectiveness, equity, flexibility, and compliance fare in a multi-jurisdictional trading program, and highlights the challenges facing a global emissions trading regime.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-07-02.
Date of creation: 05 Feb 2007
Date of revision:
emissions trading; Kyoto Protocol; European Union; linking; climate change;
Find related papers by JEL classification:
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-17 (All new papers)
- NEP-EEC-2007-03-17 (European Economics)
- NEP-ENE-2007-03-17 (Energy Economics)
- NEP-ENV-2007-03-17 (Environmental Economics)
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