Global Experiences and the Korean Perspective
KDI/EWC series on Economic Policy
Edited by Chin Hee Hahn, Sang-Hyop Lee and Kyoung-Soo Yoon
Chapter 3: Tradable Carbon Allowances: The Experience of the European Union and Lessons Learned
Jos Sijm INTRODUCTION In January 2005 the European Union introduced an Emissions Trading Scheme (the EU ETS) in order to reduce greenhouse gas emissions in a cost effective way. Since then, the EU ETS has become the cornerstone of E.U. climate policy, which has attracted much attention and stimulated debate both inside and outside the European Union. The main purpose of the present chapter is to evaluate the performance of the EU ETS during the first three to five years of its existence and to draw some lessons from its experience. These lessons may be useful in particular for other regions or countries interested in setting up and developing their own emissions trading scheme.1 The following section outlines some main features of the EU ETS up to 2012. Subsequent sections discuss different aspects of the performance of the EU ETS since early 2005, including the performance of the allocation system, the question of whether the scheme has already led to some carbon abatement, the development of the market for trading E.U. emission allowances, and the impact of the EU ETS on economic growth, industrial competitiveness, and carbon leakage. The next-to-last section discusses some important changes in the fundamentals of the EU ETS, which have been adopted and will be implemented after 2012. The final section provides a summary of some achievements and lessons learned during the first five years of the EU ETS. MAIN FEATURES OF THE E.U. EMISSIONS TRADING SCHEME UP TO 2012 As part of the Kyoto protocol,...
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