Articles published today in the first issue of new journal, Review of Environmental Economics and Policy, describe the European Union’s Emissions Trading Scheme (EU ETS) as by far the most significant accomplishment in climate policy to date, concluding that it will be central to future global climate negotiations. However since the EU accounts for only 20 per cent of global greenhouse gas emissions, the authors also conclude a global framework for managing climate policy is required in the long term.
The articles - by leading environmental economists - form a symposium, reviewing the performance of the EU ETS over the first two years of its three-year trial period between 2005 and 2007. Denny Ellerman, who coordinated the symposium, provides an introduction and overview to the EU ETS in The European Union Emissions Trading Scheme: Origins, Allocation, and Early Results, co-authored with Barbara Buchner. The paper by Convery and Redmond, Market and Price Developments in the European Union Emissions Trading Scheme, further looks at the market for allowances; the main features of the EU ETS; its institutional and legal context; and likely future developments. The third paper, by Kruger, Oates and Pizer: Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy, additionally discusses the unique decentralized structure of the EU ETS and its implications for both the functioning of the EU ETS and the prospects for a more global emissions-trading regime.
Viewed as one of the most important environmental policy developments of the past decade, the EU ETS is an ambitious effort by the EU to correct for the market failure that surrounds climate change, and to deliver the EU’s commitments to reduce carbon dioxide (CO2) emissions under the Kyoto Protocol. It aims to address the reduction of emissions of CO2 by allowing energy-intensive industrial plants and electric utilities to trade rights or allowances to emit CO2. Ellerman and Buchner focus on the allocation of the allowances. They note that, although there is evidence that some Member States and sectors received over-generous allowances, the main goal of limiting CO2 emissions was achieved. The EU has succeeded in placing a price on CO2 that starts to reflect the scarce capacity of the earth’s atmosphere to absorb more greenhouse gas emissions.
With coverage of about half the CO2 emissions originating from a region of the world that accounts for 20% of global GDP and 17% of the world’s energy-related CO2 emissions, the EU ETS is by far the largest emissions-trading scheme in the world. According to Convery and Redmond, the value of traded volume to date is estimated at €14.7 billion ($18.86 billion). More importantly, the price signal is a transnational one across European nations of significantly different economic circumstances and extending beyond Europe through the Clean Development Mechanism.
The symposium discusses the key role played by the European Commission in successfully establishing the EU ETS. The Commission’s primary role was to enforce scarcity of the allowances to ensure that they were sufficiently valuable to be traded. Individual Member States made proposals to the Commission for the number of allowances to be distributed in each country. The Commission reduced the proposed number of allowances of 14 of the 25 Member States by a combined annual amount of almost 100 million tonnes of CO2.
Ellerman and Buchner review the release of emissions data for 2005 – the first year of the scheme – which showed allowances exceeded emissions by about 80 million tonnes of CO2, or about 4% of the EU’s intended maximum emissions. Emissions exceeded allowances in only 6 of the 25 EU countries: UK, Ireland, Spain, Italy, Austria and Greece. Installations may have reduced their emissions as a result of improvements and/or investments in energy efficiency or switching to less CO2-intensive fuel types. Ellerman and Buchner find that the excess of allowances over emissions can be attributed both to over-allocation in some countries and sectors and to emission reductions in response to the price of allowances in 2005.
Allowance prices over the course of the first official year of the EU ETS surpassed all expectations of market analysts and academics. Between July 2005 and April 2006, the allowance price consistently traded over the €21-€30 range. The persistently high price, in a market characterized by a large volume of trades between sophisticated players, is strong evidence that emissions abatement is taking place. Convery and Redmond’s analysis of the historical emissions data, and allowing for the growth in emissions that accompanies growth in GDP, suggests that abatement of about 7% may have been achieved. The Commission intends to encourage further abatement by making the 2008-12 allowance totals lower than the 2005-07 totals, and it has decided to reduce the allowance totals proposed by 10 Member States to a level that is more than 12% lower than their trial-period totals.
The symposium concludes that the EU ETS is important because of its size and the number of countries participating. It shows that emissions trading can be done, and will be hard to ignore in future climate negotiations. If CO2 emissions are to be significantly reduced globally then an emissions-reducing system would need to operate at the global level. One problem in achieving this is that there is no equivalent to the Commission at a global level to play the coordinating role. More will be needed to create the community of interest and practical advantage that would cause countries such as China and India to accept meaningful constraints. However, Ellerman and Buchner note that the East-West divide within the EU bears some similarity to the global North-South divide, and there are some positive indications that the EU ETS has set the groundwork for a global system.
The challenges of establishing a global system are likely to be formidable. On the enforcement and institution side, this suggests that broad-based emissions trading within developing countries may not be a realistic goal in the near term, and other avenues for engagement and trade need to be explored.
In the short term, other national programmes are unlikely to link to the EU ETS, but Kruger, Oates and Pizer suggest price harmonization is an alternative. Countries could set their domestic policies in ways that recognize and respond to the efforts in other countries in an effort to harmonize marginal costs, and there is some evidence that this is already happening based on proposals in countries including New Zealand, Canada and Japan.
The long-term future of the EU ETS looks promising, but it remains the case that the EU accounts for not much more than 20 per cent of global greenhouse gas emissions, and this share is set to shrink over time. Convery and Redmond conclude that, to some extent, the EU ETS represents an act of faith that its leadership will result in a wider constituency for effective action in the longer term. Unless a global framework emerges out of the current discussions that is ‘incentive-compatible’ with key players, such optimism may prove to be misplaced.
Dr Denny Ellerman | alfa
Joint research project on wastewater for reuse examines pond system in Namibia
19.12.2016 | Technische Universität Darmstadt
Scientists produce a new roadmap for guiding development & conservation in the Amazon
09.12.2016 | Wildlife Conservation Society
Researchers from the University of Hamburg in Germany, in collaboration with colleagues from the University of Aarhus in Denmark, have synthesized a new superconducting material by growing a few layers of an antiferromagnetic transition-metal chalcogenide on a bismuth-based topological insulator, both being non-superconducting materials.
While superconductivity and magnetism are generally believed to be mutually exclusive, surprisingly, in this new material, superconducting correlations...
Laser-driving of semimetals allows creating novel quasiparticle states within condensed matter systems and switching between different states on ultrafast time scales
Studying properties of fundamental particles in condensed matter systems is a promising approach to quantum field theory. Quasiparticles offer the opportunity...
Among the general public, solar thermal energy is currently associated with dark blue, rectangular collectors on building roofs. Technologies are needed for aesthetically high quality architecture which offer the architect more room for manoeuvre when it comes to low- and plus-energy buildings. With the “ArKol” project, researchers at Fraunhofer ISE together with partners are currently developing two façade collectors for solar thermal energy generation, which permit a high degree of design flexibility: a strip collector for opaque façade sections and a solar thermal blind for transparent sections. The current state of the two developments will be presented at the BAU 2017 trade fair.
As part of the “ArKol – development of architecturally highly integrated façade collectors with heat pipes” project, Fraunhofer ISE together with its partners...
At TU Wien, an alternative for resource intensive formwork for the construction of concrete domes was developed. It is now used in a test dome for the Austrian Federal Railways Infrastructure (ÖBB Infrastruktur).
Concrete shells are efficient structures, but not very resource efficient. The formwork for the construction of concrete domes alone requires a high amount of...
Many pathogens use certain sugar compounds from their host to help conceal themselves against the immune system. Scientists at the University of Bonn have now, in cooperation with researchers at the University of York in the United Kingdom, analyzed the dynamics of a bacterial molecule that is involved in this process. They demonstrate that the protein grabs onto the sugar molecule with a Pac Man-like chewing motion and holds it until it can be used. Their results could help design therapeutics that could make the protein poorer at grabbing and holding and hence compromise the pathogen in the host. The study has now been published in “Biophysical Journal”.
The cells of the mouth, nose and intestinal mucosa produce large quantities of a chemical called sialic acid. Many bacteria possess a special transport system...
10.01.2017 | Event News
09.01.2017 | Event News
05.01.2017 | Event News
17.01.2017 | Earth Sciences
17.01.2017 | Materials Sciences
17.01.2017 | Architecture and Construction