Update of the Study 'Linking the EU Emissions Trading System to a Future US ETS'

Download or read book Update of the Study 'Linking the EU Emissions Trading System to a Future US ETS' written by and published by . This book was released on 2009 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: As the world's largest economy, United States is also the largest consumer of fossil energy sources and the largest per capita emitter of greenhouse gases. A newly appointed administration and changed majorities in Congress have created more favourable conditions for federal climate action. As in the European Union, emission trading is a central feature in legislation currently before the US Congress, and has already been implemented at the regional level through the Regional Greenhouse Gas Initiative (RGGI). Emergence of such trading systems in the US offers the opportunity of a future trading link to the EU Emissions Trading Scheme (EU ETS), which in turn would promise greater diversity of abatement options, improved market size and liquidity, and ultimately a more efficient allocation of resources. Subject to further conditions, existing and proposed trading systems in the US already provide for the unilateral recognition of foreign allowances, including EU ETS allowances (EUAs). Yet a full bilateral trading link allowing open market flows across the Atlantic raises additional challenges. Research has shown that differences in certain design features of ET systems can undermine the benefits of a potential market link. The Waxman-Markey bill shows that few aspects of the trading system outlined in this bill would prompt incompatibility with the EU ETS. In the near term, mitigation targets are significantly weaker than those adopted in Europe, suggesting that carbon prices will initially differ across the Atlantic; yet reduction objectives become more stringent over time, improving the prospects for a functional market link. Monitoring and enforcement structures appear sufficiently effective to afford the necessary confidence in a functioning market. More problematic are generous provisions on the eligibility of domestic and international offsets, and a low trigger price for auctions from a strategic reserve that would increase supply in the market. A US dominant climate concern has centred on the international competitiveness of its domestic industry. A transatlantic market link may be an ambitious challenge.