EU Climate Change Policy 2013-2020 : thoughts on property rights and market choices

Abstract

Under 2013 to 2020 European Union proposals for CO2 emission reduction, a Member State can transfer to another Member State ‘part’ of their allowed emission allocation in the non-Emission Trading Sector (“ETS”). The paper addresses three questions in relation to these Transfer Emission Units or TEUs. First, what mechanism should be used to facilitate the exchange of TEUs? The preferred mechanism is a uniform price auction, preferably EU-wide. Second, what ‘part’ of the non-ETS emission limit of a Member State should be classed as TEUs – 10%, 20% or no limit? The proportion of the non-ETS emission limit that should be traded should be maximised. Third, who should realise the value of TEUs – the State, existing polluters? The value of TEUs should accrue to the State.