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Symposium 2015

Virtual Library File - EU Emissions Trading Scheme Reform: a change for the better?

The Challenge

The EU's emissions trading system (EU-ETS) is the largest existing emissions trading scheme. This scheme is the main economic climate policy instrument of the EU, and it also serves as a blueprint for ...

The EU's emissions trading system (EU-ETS) is the largest existing emissions trading scheme. This scheme is the main economic climate policy instrument of the EU, and it also serves as a blueprint for other emissions trading schemes world-wide.

In 2014, the EU agreed on new and ambitious emissions reduction targets for 2030. While the EU-ETS is considered a key instrument in reaching these new targets, its effectiveness has been impeded by low carbon prices that fall short of providing the necessary incentives for urgently needed technological changes. So far, attempts to change this incentive structure have failed. The Reform proposed by the European Commission, the so-called Market Stability Reserve, will probably not go far enough for various reasons.

Carlo Carraro, Director of the International Centre for Climate Governance sees that the EU ETS reforms are moving the carbon market into the right direction while the 2030 policy framework sends some mixed signals. He supports -  if well managed -  a Market Stability Reserve since it may provide markets with short term price incentives much more effective than those sent in the last decade.