Chapter 23: The European CO2 allowances market: issues in the transition to Phase III
The European Union Emissions Trading Scheme (EU ETS) was launched in 2005, organized in such a way that considerable autonomy was given to member states through the principle of subsidiarity. This decentralized architecture was a political condition for its launch, and the result was dramatic: the market grew rapidly, becoming a key standard in terms of global carbon price (see Ellerman et al., 2010). The downside was the weakness of its regulation by the public authority, the full extent of which became apparent with the large-scale frauds and embezzlement of 2009 and 2011.1 Today no one disputes the need to strengthen this regulation, but many unknowns arise as soon as one attempts to put it into practice, since the term ‘regulation’ can have three different meanings. Regulation first refers to the set of rules ensuring the security of the market infrastructure. In the case of an allowances market, it mainly concerns the registries system, the registration procedures for recording transactions, and the conditions for market access. These rules have been greatly reinforced following the misappropriation of funds occurring in the market, and will be further strengthened with the transition to Phase III (2013–20), which will include setting up a single registry at a European level as from 2013.
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