1. Has the European Union Emissions Trading System Been a Success? Energy Law Lauren Tozzi Fall 2010

2. Outline  Background  Lower Emissions  Market Crash  Solutions  New Threats  Or, are they?

3. Background UN Framework Convention on Climate Change Kyoto Protocol EU ETS

4. Emissions Trading System Purpose Structure Timeline

5. Purpose of the ETS To help the EU and member states meet their goals under the Kyoto Protocol. Two mechanisms in the Kyoto Protocol make the ETS possible:  Aggregate Emissions  Emissions Trading

6. Terms Who’s trading? Covered installations – the entities in the Member States that must comply e/g – cement and steel factories are covered installations What are they trading? 1 allowance = permission to emit one ton of carbon dioxide

7. Commission

8. Timeline Phase I: 2005 – 2007 Phase II: 2008 – 2012 Phase III: 2013 – 2020

9. Outline  Background  Lower Emissions  Market Crash  Solutions  New Threats  Or, are they?

10. Lower Emissions MIT Study: 5% in Phase I EU Commission: 11.6% 2008-09 EU Commission: “well on-track”

11. Outline  Background  Lower Emissions  Market Crash  Solutions  New Threats  Or, are they?

12. Market Crash National Allocation Plans (NAPs) Overestimation Verified Emissions Data

13. Outline  Background  Lower Emissions  Market Crash  Solutions  New Threats  Or, are they?

14. Solutions NAP Review in Phase II EU-Wide Cap in Phase III Bonus Points

15. Solutions NAP Review in Phase II EU-Wide Cap in Phase III Bonus Points

16. Outline  Background  Lower Emissions  Market Crash  Solutions  New Threats  Or, are they?

17. What’s the new threat? And the lack of international cooperation on climate change…

18. Down Economy Causes Flood of Allowances Factories and production lines go idle  Covered installations need fewer allowances  So they sell their extra allowances, and There’s a flood of allowances.

19. What’s the new threat? AND THE LACK OF COOPERATION ON INTERNATIONAL CLIMATE CHANGE…

20. Outline  Background  Lower Emissions  Market Crash  Solutions  New Threats  Or, are they?

21. Or, are they? Good forecast despite flood of allowances Steady price of carbon despite bad news

22. Safety Net

23. Conclusion