Stefan Ulreich, Ph.D.
Since January 1, 2005, an emissions trading system has started in the European Union (i.e., the EU-25, hereafter simply EU) established to provide an economic efficient tool for the abatement of greenhouse gas emissions. The purpose of the emissions trading system is to allow companies to find the cheapest possible CO2-abatement options. A market for CO2-allowances has emerged and developed into a vivid trading place throughout the EU. During the Bali conference in December 2007, the newly elected Australian government ratified the Kyoto Protocol. Other countries such as Norway, Canada, and Japan are considering a similar trading scheme in 2008. Countries such as the United States, which do not consider greenhouse gas abatement as necessary, have not ratified the Kyoto Protocol. However, in the United States, some regional activities have begun, the Regional Greenhouse Gas Initiative (RGGI) for example.1
Exhibit 1 shows the distribution of the emissions over various countries. Due to the economic growth, especially in China and India, the total emissions will increase in the future. China is expected to become the biggest emitter in a few years.2
The background for the EU Emissions Trading System is the Kyoto Protocol. The signatories of the Kyoto Protocol have committed themselves to reduce the output of greenhouse gases to the atmosphere. Since the ...