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Market Instruments and the Protection of Natural Resources

Market Instruments and the Protection of Natural Resources

Critical Issues in Environmental Taxation series

Edited by Natalie P. Stoianoff, Larry Kreiser, Bill Butcher, Janet E. Milne and Hope Ashiabor

Only through a concerted global effort can we protect our natural resources, save our precious natural environment, and indeed our future. But pressures on natural resources come from many directions such as overuse, mismanagement and contamination. This much-needed book reviews and evaluates the use of market and fiscal instruments in protecting our natural resources, from rural to marine environments. Market instruments that are designed to protect the global atmosphere are evaluated, along with carbon instruments and environmental tax incentives. Meanwhile, consideration is given to shifting the tax burden to achieve environmentally responsible outcomes, balancing sustainable use and natural resource protection, and protecting water resources.

Chapter 12: Sectoral allocation patterns in the EU Emission Trading Scheme: Empirical evidence and outlook

Claudia Kettner

Subjects: environment, environmental economics, environmental law, environmental politics and policy, law - academic, energy law, environmental law, tax law and fiscal policy, politics and public policy, environmental politics and policy


The EU Emission Trading Scheme (EU ETS) is the most important climate policy instrument in the European Union. Implemented in 2005, the EU ETS was the first international trading system for greenhouse gas emissions and it is still the largest carbon market worldwide: currently the scheme covers more than 11,000 power stations and industrial plants in 31 countries responsible for more than 50% of the EU’s CO2 emissions. In the first two trading phases, the performance of the EU ETS was, however, characterised by pronounced surplus allocation that translated into low carbon prices. Therefore, for the third trading phase—which covers the period from 2013 to 2020—and beyond, a number of changes to the EU ETS were adopted in the EU’s 2008 Climate and Energy Package that should help improve the credibility of the scheme, incentivising low carbon investment. One major modification referred to the change in allocation procedures, giving more weight to the auctioning of allowances as compared with previous trading phases.

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