The European Union Emissions Trading Scheme

Abstract On 29 April 1998, the European Community (EC) and the initial fifteen EU member states signed the Kyoto Protocol. Under the Kyoto Protocol, the EC and the EU member states are committed to jointly reduce their greenhouse gas (GHG) emissions during the period 2008-2012 by a total of 8% below 1990 GHG emissions levels. Soon after signing the Kyoto Protocol, the EU started exploring the potential of an emissions trading scheme to help its member states comply with its GHG emission reduction targets under the Burden Sharing Agreement and the Kyoto Protocol. Despite the Kyoto Protocol not being in force and strong opposition from powerful EU member states — such as Germany and France — the European Union Emissions Trading Scheme (EU ETS) was finally adopted in October 2003 with the objective of reducing EU GHG emissions in a cost-effective and economically efficient manner. This chapter provides historic and legal background information on the EU ETS and puts the EU ETS in the context of overall EU climate policy. It also discusses the cornerstones of the EU ETS and its linkages to the Kyoto Protocol and other emission trading schemes in light of the current amendments to the EU ETS structure for the post-2012 era.