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Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy

  • Kruger, Joseph
  • Oates, Wallace E.
  • Pizer, William A.

    ()

    (Resources for the Future)

In 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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Paper provided by Resources For the Future in its series Discussion Papers with number dp-07-02.

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Date of creation: 05 Feb 2007
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Handle: RePEc:rff:dpaper:dp-07-02
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  1. Stavins, Robert, 2005. "Vintage-Differentiated Environmental Regulation," Discussion Papers dp-05-59, Resources For the Future.
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  11. Fischer, Carolyn & Newell, Richard, 2004. "Environmental and Technology Policies for Climate Mitigation," Discussion Papers dp-04-05, Resources For the Future.
  12. Hepburn, C. & Grubb, M. & Neuhoff, K. & Matthes , F. & Tse, M., 2006. "Auctioning of EU ETS Phase II allowances: how and why?," Cambridge Working Papers in Economics 0644, Faculty of Economics, University of Cambridge.
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  15. repec:reg:rpubli:190 is not listed on IDEAS
  16. Rogge, Karoline S. & Schleich, Joachim & Betz, Regina, 2006. "An early assessment of national allocation plans for phase 2 of EU emission trading," Working Papers "Sustainability and Innovation" S1/2006, Fraunhofer Institute for Systems and Innovation Research (ISI).
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