On 10 January 2007, the European Commission outlined the European Union's 'energy and climate change vision' based on two principal documents: Communication on “An energy policy for Europe”, and Communication on future climate change policy for the period post-2012 when the Kyoto Protocol expires, entitled “Limiting global climate change to 2°C: The way ahead for 2020 and beyond”.
Emissions trading is a market-based mechanism designed to allow firms to choose the most cost effective strategy to meet environmental standards. The success of SO2 and NOx emissions trading systems in the United States and the launch of the ambitious European Union Emissions Trading System (EU ETS) underscore the value of emissions trading as a tool for environmental policy.
Topic:
Economics, Environment, and International Cooperation
This report constitutes Part II of the CEPS Task Force Report on Reviewing the EU Emissions Trading Scheme. Part I was presented to the UK Presidency on 7 July 2005, and subsequently published on the CEPS website. It focused on a number of short-term implementation issues linked to the second round of allocation, including transparency requirements of the National Allocation Plans (NAPs), the definition of installations, treatment of small installations, new entrants, closure and transfer rules, allocation methodologies, the possibility of opt-ins as well as monitoring, reporting and verification. Part II examines deepseated issues such as economic impact and effects on investment as well as the potential inclusion of aviation. These issues are expected to have a major influence on the second phase of the EU Emissions Trading Scheme (ETS) in 2008-12.
The EU and the US have found themselves supporting two polar views on which strategy is the most effective in achieving stabilisation of greenhouse gas (GHG) emissions: 'market pull' vs 'technology push'. As an advocate of the latter, the US asserts that the principal emphasis should be on technology development, financed through typical public R programmes. It argues that it would be preferable to invest in the short term in R and to adopt emissions limitations later, when new technologies will have lowered the cost of limiting GHG emissions. In supporting the 'market-pull' approach, the EU argues that technological change is an incremental process emanating primarily from business and industry, induced by government incentives. According to this logic, profit-seeking firms will respond with technological innovation.
With the cancellation of the Oslo ministerial mini-summit, the prospects for an early entry into force of the Kyoto Protocol are rapidly fading. Even if the US agrees to an outcome at a resumed COPbis in July, continued Congressional opposition and unresolved questions concerning the developing countries' commitments make US ratification highly implausible.
Topic:
Environment, International Law, and Science and Technology