European Union 's Emission Trading Scheme

1416 Words Oct 6th, 2014 6 Pages
Despite the efficiency of the European Union’s emission trading scheme (or EU ETS) with its economic and environmental policy designed to reduce the greenhouse gas and carbon dioxide emissions within the earth’s atmosphere, further research have revealed the strengths and weakness that EU ETS experience while determining how much greenhouse gas and carbon dioxide a country can emit. One of the main strengths of EU ETS is its cost-effectiveness. Limiting the amount of greenhouse gases and carbon dioxide emitted requires a market-based policy instrument such as a trading market (European Commission, 2005) to ensure that the emitted gases are restricted in the most economical way. Canadian economist John Dales (1968) suggests that a market of pollution rights requires no person or agency to set the price, instead it is set by the competition among buyers and sellers of pollution rights (Mak, 2011). Dales’ suggestion seems to be pointed directly towards the potential ability to strengthen and bring the ETS closer to an economic manner. Experts estimate that EU ETS, the cap-and-trade regime, would enable the EU to reach its Kyoto target at a cost between €2.9billion and €3.7billion annually (Mak, 2011), which equals less than 0.1% of the EU’s GDP in 2005. In contrast, without EU ETS, but a command-and-control policy (Mak, 2011), the total compliance cost could amount to €6.8billion a year (Mak, 2011), achieving a saving of at least 45%. (Mak, 2011) This estimation shows how…
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