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Predictability in the Administration of the EU ETS as a Foundation for Market Confidence PDF Print E-mail
EU Emissions Trading Scheme
Written by Gunnar Baldwin   
Thursday, 01 March 2012 11:33

A protracted recession and fragmented carbon market policies in the European Union and its member states threaten to undermine the perception of the EU Emissions trading Scheme (EU ETS) as a blueprint for the future of emission trading schemes in the rest of the world. A key challenge for the ETS has been an oversupply of emission allowances resulting from optimistic assumptions concerning the economy. An oversupply of allowances creates market uncertainty and undermines incentives for investment in renewable energy and energy efficiency.

It would be wrong to conclude that the EU ETS is failing, the International Emissions Trading Association (IETA) says in a new position statement, and the proper response to economic volatility should not be a series of ad hoc market interventions. In order to provide an investment climate that provides sufficient confidence to support robust investment in green technology and renewable energy (the very investment needed to establish a trajectory for long-term economic growth), the European policy makers must show that they have a responsive but unwavering game plan.

At the heart of concerns over an inconsistent regulatory approach is a recent vote by an EU parliamentary committee for measures that would establish a set-aside for carbon allowances (removing a number of allowances from the ETS), reducing the oversupply of carbon allowances that has resulted from a weak EU economy.

EU Court Overturns European Commission Decision Regarding 2nd Phase of ETS PDF Print E-mail
EU Emissions Trading Scheme
Written by Max Schwartz   
Tuesday, 29 September 2009 16:00

In a ruling sure to have wide-ranging effects on how the EU Emissions Trading Scheme (EU-ETS) will be governed, the European Court of First Instance ruled that the European Commission (EC), had overstepped its boundaries in rejecting national allocation plans for two countries: Poland and Estonia.

The countries had originally appealed decisions made in 2003 for the 2nd phase of the EU-ETS, which runs from 2008-2012; those decisions had been made by the EC and had set each country's allocation of carbon credits lower than they had originally proposed. The Court ruled that the EC could not:

  • Reject a country's credit allocation plans on any other ground besides incompatibility with the Directive creating the EU-ETS; (In this case the EC had rejected Poland and Estonia's plans based on what it deemed to be faulty data.)

  • Ignore the data submitted by a country and replace it with its own data obtained through its own methods; and

  • Impose a single way of assessing credit allocations on all members of the EU-ETS.

European carbon market participants expressed concerns over the ruling:

“It means two things — possibly more allowances in the market and more uncertainty,” Emmanuel Fages, a carbon analyst with Société Générale, the investment bank, said. “It’s another blow because people will say the market doesn’t work.”

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