the commission’s proposal for a revised ets looking backward and forward jørgen wettestad ieep...
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The Commission’s proposal for a revised ETS
Looking backward and forward
Jørgen Wettestad
IEEP seminar
Brussels, february 28 2008
Approach Mainly based on Jon B.Skjærseth and
Jørgen Wettestad, EU Emissions Trading – Initiation, Decision-making and Implementation, Ashgate 2008
Focus on four key ETS design characteristics– Centralization
– Sectoral coverage
– Method of allocation
– Links to Kyoto CDM/JI
Approach
What did the Commission initially want?– Preferences expressed in e.g. 2000 Green
Paper and 2001 ETS proposal
The present proposal for ETS post-2012 Will the Commission prevail - and why?
– Main expectation is smooth process? But things may happen..Cf. US Kyoto exit in 2001...
– Very probing and tentative. Comments very welcome!
Centralization What did the Commission initially want?
– Green Paper 2000: implicit plea for centralized setting of caps
The present proposal– Centralized setting of caps
Will the Commission prevail?– Probably.Quite amazing really, given the
strong initial decentralization drive...
– Pilot phase experiences; ’climate craze’ ...
– Opponents: Italy, Spain, Poland?
Sectoral coverage What did the Commission initially want?
– IPPC and LCP ’population’, focus on ’energy activities’
– Inclusion of chemical industry
Current proposal– Airlines already in 2012
– Inclusion of some chemical industry emissions (petrochemicals, production of ammonia..)
– Aluminium and CCS
Will the Commission prevail?– Probably? Exclusion of most chemical industry still
important to comfort Germany??
– Will the EP this time around seek and succeed in a further broadening? Or content with the contentious airline issue?..
Method of allocation
What did the Commission want?– Green Paper 2000: auctioning ’technically
preferable .. Free allocation no easy option
Current proposal– Full auctioning from 2013 for power sector
– In other sectors, gradual decrease of free allocation
– Except sectors particularly exposed to global competition (clarified 2010/11)
Method of allocation
Will the Commission prevail?– Probably?
– Power industry weakened due to windfall profits debate?
– Energy-intensive industries succeeded in lobbying of Commission?
– Parliament satisfied with the power sector approach?
Links to Kyoto CDM/JI What did the Commission want?
– Initially ambiguous/split here?
– Linking could enhance cost-effectiveness, but reduce incentives for EU-internal abatement
Current proposal– .A bit complex, and contingent on international
developments
– If no ’satisfactory global agreement’, then no new CDM/JI credits and stronger incentive to EU-internal abatement
– But what constitutes a ’satisfactory agreement’?
Links to Kyoto CDM/JI
Will the Commission prevail?– Possibly?
– Although tight CDM limits will hurt for climate policy struggling states such as Spain, Italy..
– And the Commission cut majority of proposed CDM/JI limits in NAP II process
– So potential for a ’rebellion’ here?
Concluding comments
Main impression: the Commission seems now set to achieve the centralised and auction-based ETS it initially sought
Is this then a grand tactical victory for the Commission?
Or is it sheer luck?– ’The climate craze’...
Concluding comments
Will this ’method/tactic’ be applied in the case of renewables trading?
Or decentralised pilot phase and NAPs necessary due to data uncertainty etc.?