What Lies Ahead for the EU ETS?
27 July 2007
By Daniel Radov and former NERA Consultant Per Klevnas
The implementation of the European Union Emissions Trading Scheme (EU ETS) for greenhouse gases is currently under review, with proposals for modifications to the legal framework due from the European Commission (EC) later this year. In this article from Power UK, NERA Associate Director Daniel Radov and former Consultant Per Klevnas examine the potential future direction of the scheme. Key issues include how the future emissions "cap" will be set, to what extent emissions allowances will be auctioned rather than allocated for free, and the potential basis for any future free allocation. A key factor influencing decisions on these issues for some sectors, although possibly less so for the power sector, is the extent to which each sector is exposed to international competition -- and how this might change if potential international agreements on climate change policies are reached. The authors point out that, with many in Europe calling for greater harmonization and centralization of decisions, the overarching question for each of these issues is who will make the decision to replace the current autonomy granted to Member States.
