Early Observations on the European Union's Greenhouse Gas Emission Trading Scheme: Policy Insights for United States Policymakers

Report April 19, 2006 Read time:

As of February 2006, 161 countries had ratified the 1997 Kyoto Protocol, which entered into force on February 16, 2005. The Protocol signifies broad international agreement that the developed nations should take the lead in reducing greenhouse gas emissions, the bulk of which have been emitted from the industrialized world.

The European Union's leadership in the climate change arena was evident before the Protocol formally went into force. In 2000 the European Union (E.U.) initiated the comprehensive European Climate Change Program. A cornerstone of this program is the Greenhouse Gas Emission Trading Scheme, or the E.T.S., which was launched in 2005 and is the most ambitious emissions trading system ever established.

This paper describes how the E.T.S. is working thus far and it also asks what U.S. policymakers can learn from the E.T.S.'s early implementation as they develop climate change policies in the United States. The greenhouse gas reduction plans implemented across the E.U. necessarily vary because each Member State's regulatory, historical, political, and economic circumstances are unique and because each country has a different emissions goal under the E.U.'s climate change burden-sharing agreement. These sundry approaches offer a diverse range of experiences to draw on as U.S. policymakers try to craft greenhouse gas regulatory schemes at the state, regional, and national levels.

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