Context

Lineage and birth of the EU ETS

Almost like a living organism, the European Union Emissions Trading Scheme (EU ETS) is one of the final lines of an elaborate and complex process. This process began years ago with the formal acknowledgment at international level “that change in the Earth's climate and its adverse effects are a common concern of humankind” (United Nations, 1992) and the recognition “that human activities have been substantially increasing the atmospheric concentrations of greenhouse gases, that these increases enhance the natural greenhouse effect, and that this will result on average in an additional warming of the Earth's surface and atmosphere and may adversely affect natural ecosystems and humankind” (United Nations, 1992). This recognition led to setting a goal, namely the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system” (United Nations, 1992).

From this awareness and with this general objective in mind, a first operational step was taken with the highly publicized Kyoto Protocol (United Nations, 1997) which sets quantified emission reduction targets for each developed country. In order to fulfill these commitments while taking into account the technical, political and economic constraints, several tools were created including MRV procedures, flexibility mechanisms and a compliance committee.

The role of the MRV procedures is to ensure that the developed Parties to the UNFCCC monitor and submit their annual emissions in a way which assures comparability and consistency with the rules of the Protocol (see Chapter 2 on national GHG inventories under the UNFCCC). The market-based mechanisms intend to provide Parties with the possibility to abate emissions where it is cheapest. The compliance committee ultimately judges whether Parties complied with the rules and mechanisms. In particular, it solves disputes between Parties, or between a Party and an expert review team (see Chapter 2 on national GHG inventories under the UNFCCC).