Weishaar, Stefan --- "The European emissions trading system: auctions and their challenges" [2008] ELECD 425; in Faure, Michael; Peeters, Marjan (eds), "Climate Change and European Emissions Trading" (Edward Elgar Publishing, 2008)

Book Title: Climate Change and European Emissions Trading

Editor(s): Faure, Michael; Peeters, Marjan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847208989

Section: Chapter 13

Section Title: The European emissions trading system: auctions and their challenges

Author(s): Weishaar, Stefan

Number of pages: 20

Extract:

13. The European emissions trading
system: auctions and their challenges
Stefan Weishaar

1. INTRODUCTION
On 25 October 2003, Directive 2003/87/EC governing the European
Emissions Trading System (EU ETS) for greenhouse gas emission allowances
for energy intensive installations entered into force. Thereby all Member
States were obliged to establish an emissions trading scheme as of 1 January
2005. Around 5000 operators with approximately 12 000 installations partici-
pate in this multi-jurisdictional attempt to reduce CO2 emissions from four
broad sectors: energy, ferrous metals, minerals, pulp and paper.1 The
programme is implemented in multiple phases: the first ranging from
2005­2007; the second from 2008­2012, which resembles the Kyoto Protocol
compliance period; and subsequent phases are consecutive five-year periods.2
The operation of the Emissions Trading System required the introduction of
emission allowances into the market. Member States were obliged to draft so-
called National Allocation Plans (NAPs) in order to indicate how to allocate the
allowances to operators. During the first trading period 95% of all emission
allowances had to be allocated free of charge and in the second trading phase this
number only marginally increased to 90%.3 In January 2008 the European
Commission delivered a proposal to amend Directive 2003/87/EC in order to
improve and to extend the greenhouse gas emission allowance trading system of
the Community. At the heart of the proposed amendment lies a fundamental
change of the prescribed allocation methods. While free allocation mechanisms,
in particular grandfathering, have ...