A Critical Review of the European Union’s Emissions Trading: an Understanding from Concept to Reality

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A Critical Review of the European Union’s Emissions Trading: An Understanding from Concept to Reality

The way in which Western, developed states have sought to deal with environmental problems, and particularly climate change, can be encapsulated within the ecological modernisation agenda; the notion of which implies that ‘market forces in partnership with an enabling state are seen as the means of achieving both economic and environmental objectives’ (Blowers 2000, p. 1). One could argue how these market based solutions are only natural, given that we live in market based economies. With respect to climate change, this agenda has primarily taken the the form of creating a carbon price, allocating property rights to pollute in a global commons and the idea that markets are more flexible and efficient. A perfect example illustrating such measures is the European Union’s Emissions Trading Scheme (EU-ETS), which is a purely economic strategy in helping member states reduce their C02 emissions in a cost effective way. The concept of the system, does in effect achieve the fundamental goal of reducing overall C02 emissions, yet overlooks a number of political realities or issues including distributional concerns of C02 permits, the lack of an International agreement and the social cost of carbon. These are three significant areas surrounding a number of others (i.e. vulnerability to fraud and import emissions) which I shall unpack in greater depth within this analysis.
The EU-ETS is a ‘cap and trade’ scheme that was established to help the EU meet its GHG emission target of 8% below 1990 levels under the 1997 Kyoto Protocol (DECC, 2012). It came into force in January 2005, launching a three phase period of operation - Phase I ‘Trial Period’: 2005-2007, Phase II ‘Commitment Period’: 2008-2012 and Phase III ‘2nd Commitment Period’: 2013-2020 - and now applies to 27 EU member states (Europa, 2008). The initial emissions cap setting process is decentralized, in that

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