Linking Emissions Trading Schemes with the European Union

• Main Author: Vaiciulis, Rolandas
• Format: Article in Journal/Newspaper
• Language: English
• Published: Graduate Studies 2013
• Subjects: Law; FOS Law; Emisions trading; EU ETS; Linking; Emissions trading schemes; climate change; Climate policy; ETS; Alberta; Canada; Norway; Iceland
• Online Access: https://dx.doi.org/10.11575/prism/26770; https://prism.ucalgary.ca/handle/11023/505

Emissions trading is a crucial policy tool for reducing greenhouse gas emissions in a cost-effective way. The world’s largest existing emissions trading scheme is the European Union’s cap-and–trade Emissions Trading Scheme (EU ETS). It was established in 2005 through the Emissions Trading Directive to help the European Union and its member states to reduce greenhouse gas emissions and fulfill their commitments under the Kyoto Protocol in a cost-effective way. The Directive recognizes that linking the EU ETS to other emissions trading schemes would increase the cost-effectiveness of reaching the community’s emissions reduction commitment. When the EU ETS was launched in 2005, in its first phase, it covered over 11,500 energy-intensive installations across the then 15 EU member states, representing 45 percent of the EU’s carbon dioxide (CO2) emissions. Currently in its second trading period, from 2008 to 2012, the EU ETS now addresses emissions from the enlarged EU, with 27 member states. The EU ETS is also linked to domestic emissions trading schemes in Norway, Iceland and Lichtenstein. Most recently, in August 2012, Australia and the EU announced their intention of linking their emissions trading schemes. Switzerland is also considering the establishment of a domestic emissions trading scheme and anticipating linking to the EU ETS in the future. Because of its size and harmonization experience, this scheme offers a starting point for establishing a global network of greenhouse gas emissions trading schemes. Greenhouse gas emissions trading schemes in Canada, in particular, the proposed federal scheme and the existing Alberta provincial scheme are also potential candidates for linkage under article 25 of the EU Trading Directive, through an agreement for the mutual recognition of allowances. However, the different designs of the EU and Canadian domestic emissions schemes will pose challenges in establishing linkage. This thesis identifies some of the key features in the design of emissions trading schemes and the implications of these design features when exploring linkage between the EU ETS and the Canadian emissions trading schemes.