Climate Change and European Emissions Trading
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Climate Change and European Emissions Trading

Lessons for Theory and Practice

Edited by Michael Faure and Marjan Peeters

This timely book focuses on the EU-wide greenhouse gas emissions trading scheme for major sources. It combines legal and economic approaches and reviews the major revision of this scheme. A distinguished range of authors assess the experiences thus far and also consider future development from both theoretical and practical perspectives. They also discuss many design options, including auctioning, credit and trade, the inclusion of aviation emissions, and linking possibilities. Moreover, attention is paid to the role of legal principles, the role of case law, and to aspects of democratic accountability within an emissions trading scheme. Ways to avoid carbon leakage and the role of national climate policies are also discussed. This book makes clear that the economic efficiency and effectiveness of an emissions trading scheme depend to a large extent on the specific legislative choices, and hence the legislative design of such a scheme deserves meticulous attention.
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Chapter 7: The Underestimated Possibility of Ex Post Adjustments: Some Lessons from the Initial Greenhouse Gas Emissions Trading Scheme

Chris Backes, Kurt Deketelaere, Marjan Peeters and Marijke Schurmans


Chris Backes, Kurt Deketelaere, Marjan Peeters and Marijke Schurmans 1. INTRODUCTION An ex post intervention within an emissions trading scheme is a governmental decision that changes the legal circumstances under which the market and thus the market participants may operate. A specific example of such an ex post intervention, which is the focus of this chapter, is the upwards or downwards adjustment of the amount of tradable rights (also called allowances) to which a company is entitled. From a viewpoint of legal certainty, ex post adjustments concerning allocated tradable allowances need careful attention. Indeed, the withdrawal of issued traditional ‘permits’, let alone modern tradable allowances, needs to be balanced between, on the one hand, the specific legal position of the permit-holder, and, on the other hand, the specific policy goal that motivates the administration to withdraw the permits. Secondly, particularly for an emissions trading market, stability of the legal conditions under which trade can occur is seen as an important stimulus for letting the market work. Without confidence in the trading system, participants would be reluctant to trade. Moreover, as with all environmental and other legislation, the administrative tasks for implementing the emissions trading instrument should be transparent and should be kept as feasible and simple as possible. Following these considerations, the governmental competence to conduct ex post adjustments with regard to allocated emissions rights needs meticulous consideration. However, these considerations need to be done in view of the specific emissions trading model. There is a difference between, on the...

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