A Comparative Analysis of New Environmental Policy Instruments
This chapter focuses on emissions trading which is a novel policy instrument, at least in Europe. As Chapter 2 explained, the principle idea behind emissions trading is to create a market for (emission) allowances to reduce emissions in the most cost-efficient manner. The US first innovated with emissions trading schemes (ETSs) in the 1980s, Denmark, the UK and the Netherlands established the first European ETSs in the 1990s. In 2003 the EU adopted the world’s first supranational ETS which became operational in 2005. The next section explains how emissions trading arrived on the political agenda in Europe. It also explains some of the core differences between different types of ETSs. The sections which then follow assess the evolution of emissions trading in the UK, the Netherlands, the EU, Germany and Austria in roughly the order in which these five jurisdictions first innovated with ETSs. The final section offers a concluding analysis. The Canadian economist John Dales (1968) is widely credited as having laid the intellectual foundations for ETSs (see Chapter 2) (Hansjürgens, 2005: 5; Lafeld, 2003: 44; Wurzel, 2008a: 3). Some European environ- mental economists praised emissions trading from as early as the 1970s (for example, Bonus, 1976; Siebert, 1976). However, European policy makers shunned it until the late 1990s. The principle idea behind emissions trading is relatively simple and universal to all ETSs. Countries and/or companies are allocated pollution rights in the form of emission allowances which can be traded in the market place.
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