TheCompensators* » 6 How to improve emissions trading

6 How to improve emissions trading

The EU Emissions Trading Scheme is the most advanced mechanism of assigning cost to the emission of greenhouse gases. Yet it is far from perfect and needs to be improved.

The total amount of available emissions rights must be reduced!

Emissions must be reduced to 50% of 1990 levels  by 2050 (for the participating countries i.e. EU 27 plus Liechtenstein, Norway and Iceland).

In 1990 the EU 15 emitted 2.06 billion tonnes of CO2, i.e. its emissions should be no more than one billion tonnes of CO2 by 2050.

In 1990 the EU 27 emitted 5.57 billion tonnes of CO2, i.e. its emissions should be no more than 2.3 billion tonnes of CO2 by 2050.

In 2008 the EU 27 emitted 4.94 billion tonnes of CO2, i.e. 11.3% less than in 1990. This decrease was mainly caused by the economic crisis in 2008 and the decline of heavy industries especially in Eastern Europe

Considering that the industrialised countries today produce much more CO2 than developing countries this is an underestimation of what really must be done.

The EU set a reduction target of 20% compared to 1990 levels by 2020, and emissions under the EU ETS shall be limited to 1.72 billion tonnes, compared to 2.08 billion tonnes per year in 2008-2012.

All emissions rights must be sold (e. g. at auctions) instead of being handed out free of charge!

During the 2008-2012 period as little as 10% of all EUAs are by the EU ETS member states; in Germany 8.8% of certificates were sold.

The EU has set itself the target of selling 70% of all certificates by 2020 and 100% by 2025.

All emissions must be included in the trading scheme!

Currently, only about 50% of EU CO2 emissions and 40% of all greenhouse gas emissions are covered by the ETS.

Since the EU is not planning on significantly extending the ETS’ scope, we have to do it ourselves by buying the certificates for the emissions we cause.

Emission rights must be traded globally, since greenhouse gas emissions are a truly global “product”!

Under the Kyoto protocol there exists a trading mechanism for so-called Assigned Amount Units (AAUs), but it is not working due to a lack of commitment, especially by the Untied States, and the absence of effective ways of penalising this at the global level.

The EU ETS shows that a transnational trading scheme can work in principle and that extending it to the rest of the world is challenging but possible.