Colby and the European Cap and Trade Model

Claim: The EU’s Emissions Trading System (ETS) has made the use of cap and trade more likely in the future.           

Reason: The ETS is successful because it has established a working cap and trade model for others to build on.

Assumption: Whatever establishes a working cap and trade model for others to build on also makes the use of cap and trade more likely in the future.

 

            The concept of cap and trade spur strong emotions not only in environmentalists but in economists, politicians and now in Europeans as well. The European Union implemented the first phase the first multinational cap and trade program, called the Emissions Trade System (ETS), from 2005-2007. Despite shortcomings, more cap and trade programs are likely to be introduced in the future because a working system—the ETS—has been established as a working model.

            The success of the ETS has been due, in large part, to its multinational character. This program began with 15 member of the EU who pioneered the test phase of the ETS. As a result of the large number of countries involved and the political negotiations necessary to establish the system, the ETS has received a lot of publicity in Europe throughout the world. The attention for just the initial phase continues even three years after its completion. Analysis now indicates that phase one reduced carbon emissions by 1.9%. The overall consensus is that this has been an environmental success. The most important thing that has been established is that the ETS is a working model of cap and trade that could be used in other locations to reduce carbon emissions.

            The success of the ETS is apparent in the expansion of the ETS system. Due to the broad support for the system, participation expanded in the second phase. Some of the smaller countries in Europe joined the ETS as did three non-EU members: Norway, Iceland, and Liechtenstein. These three countries reveal that the environmental progress of the ETS will draw other countries into using a similar system. Where members of the EU might join as a result of union pressure, these three outside countries clearly joined independent of these pressures and because the ETS was working.

            Those who claim that the ETS has damaged the future implementation of cap and trade to combat carbon emissions point to its economic affects. While it is true that the ETS has had some unforeseen economic consequences, the ETS is developing mechanisms to combat these problems. The second phase of the ETS implemented flexibility mechanisms, such as joint implementation and the clean development mechanism, to lessen the ETS’s economic impact. This willingness to change the system and consider the economy makes the ETS an ideal model because of it versatility.

            As time goes on, the benefits of the ETS are becoming clearer. It has reduced emissions in Europe, showing that cap and trade is a viable option to reduce carbon emissions. This success has led to an expansion of cap and trade in Europe. Non-European countries will be more likely to implement cap and trade because they have seen that it works and can more confidently develop their own systems with the lessons learned from the ETS model.