The Origin, Evolution and Consequences of the EU Emissions Trading System

Abstract

The EU Emissions Trading System (EU ETS) is the cornerstone of EU climate policy, a grand policy experiment, as the first and largest international emissions trading system in the world. In this article, we seek to provide a broad overview of the initiation, decision-making and implementation of the EU ETS so far. We explore why the EU changed from a laggard to a leader in emissions trading, how it managed to establish the system rapidly, and the consequences to date, leading up to the 2008 proposal for a revised ET Directive for the post-2012 period. We apply three explanatory approaches, focusing on the roles of the EU member states, the EU institutions and the international climate regime, and conclude that all three approaches are needed to understand what happened, how and why. This also reveals that what happened in the early days of developing the system had significant consequences for the problems experienced in practice and the prospects ahead.