2013年-CEPS欧洲政策研究中心_What_lessons_can_be_learned_from_the_EU_emissions_trading_scheme_6页_335kb

EU Emissions Trading Scheme (EU ETS) Summary

Core Content

The EU Emissions Trading Scheme (EU ETS), introduced in 2005, is the world's only mandatory cap-and-trade system for greenhouse gas (GHG) emissions. It serves as a key instrument in the EU's broader strategy to reduce emissions in a cost-effective manner. The system was designed to be part of a comprehensive package of abatement measures rather than a standalone solution.

Key Features of the EU ETS

• Cap-and-Trade Mechanism: Member states set caps on emissions from specific sectors, primarily the power and industry sectors (e.g., steel, cement, glass, paper and pulp), which account for 40% of total EU emissions.
• Allowance Allocation: Initially, allowances were allocated for free until 2012, which was seen as a sweetener for industry.
• Compliance Options: Companies can either reduce emissions or purchase allowances/credits from the Clean Development Mechanism (CDM) or Joint Implementation (JI), both under the Kyoto Protocol.
• Price Signal: The decision to reduce or buy allowances is based on market price signals for CO₂, ensuring cost-effective emission reductions.
• Learning by Doing: The EU ETS was introduced in two phases (2005-07 and 2008-12), with the first phase serving as a pilot to build knowledge and confidence among stakeholders.

Challenges and Lessons Learned

• Technical and Administrative Issues: The first period faced challenges in defining installations, interpreting provisions for new investment, and ensuring data accuracy for emissions prior to 2005.
• Economic Uncertainty: Some member states overestimated economic growth, leading to allocation issues. These were largely resolved in the second period.
• Political Hurdles: The introduction of strict caps was politically difficult, especially before the Kyoto Protocol commitment period (2008-12) began.
• Competitiveness Concerns: Industries feared double taxation due to both process emissions and higher power prices, but the low CO₂ prices have mitigated these concerns.
• Impact on Power Sector: Power generators, especially coal plants, could profit from the system due to the marginal cost-based pricing mechanism.

Future Developments

• EU ETS Review: The European Commission proposed major changes in 2008, including a single EU-wide cap, longer allocation periods (2013-20), and annual emission reductions of 1.74%.
• Auctioning and Free Allocation: The power sector will transition to full auctioning from 2013, while free allocation for industry will be phased out unless it harms competitiveness.
• CDM/JI Credits: Until a global agreement is reached, the use of CDM/JI credits is restricted. After agreement, their use can increase to 50% of additional abatement efforts.
• Political Approval: The proposal now awaits approval from the European Parliament and Council, with a critical meeting scheduled for March 13-14, 2008.

Implications for Japanese Stakeholders

• Long-Term and Dynamic Approach: Japan should adopt a long-term perspective and remain flexible in its climate policies.
• Clarity and Transparency: The EU ETS model highlights the importance of clear, transparent, and flexible rules in emission trading systems.
• Firm Commitments: Ensuring firm commitments to emissions reductions is essential for effective policy implementation.
• Learning from EU Experience: The EU ETS has demonstrated the ability to adapt to changing circumstances, offering valuable insights for Japan.

Conclusion

The EU ETS has played a crucial role in shaping the EU's climate policy and has contributed to the development of CDM. Despite initial challenges, it has shown resilience and adaptability, providing a model for other regions, including Japan, to consider in their own climate strategies. The system's integration into the broader EU policy framework and its ability to evolve make it a significant reference point for global climate governance.