EU emissions trading scheme

The next couple of years will be crucial for the future of trading greenhouse gases (GHGs). Europe is reviewing the way its trading system operates to address the lessons it has learned to date and increasingly others are designing and implementing trading programs. New Zealand has recently published its proposals, Australia is looking at how it would implement a trading system, and a growing number of states and provinces in the United States and Canada are committing to cap-and-trade as a policy measure to tackle GHGs, while awaiting action at a federal level.

The combination of the environmental certainty of the “cap” on total emissions, combined with the flexibility for facilities to trade emissions allowances to meet their targets at lowest cost has made this an attractive policy option, alongside other policies to protect air quality and to tackle individual and corporate behavior. While carbon taxes are much discussed and have their place in the policy mix, they cannot guarantee the environmental impact and are less economically efficient.

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