Can two become one?

The UK government and the European Commission have taken
different approaches to the design of their greenhouse gas emissions
trading schemes. But, somehow, the overlapping schemes will have to
be joined up.Two emissions trading experts defend the respective
approaches, and make some tentative suggestions to square the circle

In April, a voluntary greenhouse gas (GHG) emissions trading scheme (ETS) is due to begin operating in the UK. Put simply, the ‘cap-and-trade’ scheme, which aims to reduce GHGs by the equivalent of 2 million tonnes of carbon dioxide CO2e) a year by 2006, will see companies awarded a declining number of tradeable allowances for their GHG emissions over five years.
But in October, the European Commission released its draft directive for an EU-wide trading scheme, due to begin in 2005. Unlike the UK ETS, the scheme is mandatory, only covers CO2, and is restricted to specific sectors (including the electricity generators). Crucially, it targets ‘direct’ emitters of CO2, whereas the UK scheme addresses ‘indirect’ emissions caused by electricity consumers.
Both schemes aim to help countries meet their GHG reduction targets set under the 1997 Kyoto Protocol. Both aim to segue into Kyoto’s international emissions trading scheme, which comes into force in 2008.
But the different approaches pose a dilemma for policymakers. The Commission is anxious to avoid a proliferation of incompatible domestic schemes (Denmark has already introduced a trading scheme covering electricity producers), whereas the UK government is reluctant to amend its well-advanced plans. Furthermore, many businesses prefer its initially voluntary approach to emissions trading.
Over the next couple of years the directive is to be debated by ministers from the EU’s 15 member states, and by the European Parliament. The outcome will shape how European businesses approach emissions trading under Kyoto. Below, two emissions trading experts open the debate.

 

John Craven, head of secretariat of the UK's Emissions Trading Group, sets out the case for the UK trading scheme. More...

James Cameron, a London-based lawyer and emissions trading expert with US law firm Baker & McKenzie, argues for the EU approach. More...

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