Academic journal article Romanian Journal of European Affairs

European Emission Trading Scheme at a Turning Point - from the Pilot Phase to Post-2012

Academic journal article Romanian Journal of European Affairs

European Emission Trading Scheme at a Turning Point - from the Pilot Phase to Post-2012

Article excerpt

Abstract:

Climate change action has become a top priority for the European governments and for the European Union. Since the polluters are part of the energy-intensive industries, the mechanisms designed to reduce greenhouse gas emissions should focus on the economic sector as a primary source of concern. Therefore, environmental issues interrelate with the economic ones and one viable expression of this relation is the EU ETS, a cap-and-trade mechanism. The ETS started with a pilot phase in year 2005 and will continue with a third phase after 2012, period which coincides with the end of Kyoto's commitment. Although statistical data prove that the EU ETS is becoming more efficient with each phase, in the absence of global involvement the efforts invested in the scheme will be made in vain.

Keywords: European emission trading scheme, national allocation plan, allowance, greenhouse gases, EU-wide cap.

JEL: Q - Environmental and Ecological Economics; Q 5 - Environmental Economics; Q 56 - Environment and Development; Environment and Trade

Introduction

The European Emission Trading Scheme could be a possible answer to cl imate change challenges in the European Union. But is the mechanism designed to reduce greenhouse gas emissions sufficiently enough to achieve Europe's role as an international leader in climate change action? The limitations within the framework of the scheme, as well as the obstacles encountered, such as low international commitment, could affect the emission trade mechanism, although it recorded good results in emission reduction trend of the last two years.

We begin our study by explaining the prior legislation and the methodology of the emission trading scheme, then in another section we discuss about the first two phases of the allocation system and the way the European Union gained experience in the implementation process at national level. Part four deals with the flaws of the EU ETS, while the fifth section refers to possible recommendations and measures to improve the mechanism, and also debates over the post-2012 period as a turning point for the energy and environmental policy of the EU. The article concludes with a case-study on the Romanian implementation process of the scheme, if the implementation process was successful and the greenhouse gas emissions have been reduced.

EU ETS is the abbreviation for European Union Emission Trading Scheme. The initiative to start such a programme is stated in the preamble of the Directive 2003/87 '/EC. But the first official document to announce it was the Green Paper released in March 2001 which "[...] launched a debate across Europe on the suitability and possible functioning of greenhouse gas emissions trading within the European Union". The Sixth Community Environment Action Programme (Decision No 1 600/2002/EC) "[...] identifies climate change as a priority for action and provides for the establishment of a Community-wide emissions trading scheme by 2005". Climate change and the gas emission reduction with 8% by 2012 in contrast with 1990 levels have been the main concerns of the European Union since the Kyoto Protocol was adopted in 1997. However, the major motivation that led to the development of the EU ETS as a possible mechanism to respond environmental challenges was the United Nations Framework Convention on Climate Change in 1992, which purpose was to establish a scheme for trading emissions in order to avoid dangerous manifestations in the climate system.

The main European legislation for the EU ETS consists of several Directives, such as: Directive 2003/87 IEC of the European Parliament and of the Council of 13 October 2003, establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, Directive 2004/1 01 IEC of the European Parliament and of the Council of 27 October 2004, amending Directive 2003/87/EC in respect of the Kyoto Protocol's project mechanisms, Directive 2008/101/EC of the European Parliament and of the Council of 19 November 2008, amending Directive 2003/87/EC, and also Directive 2009/29/ EC of the European Parliament and of the Council of 23 April 2009, amending Directive 2003/87/EC. …

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