Climate Policy

Climate Policy 5 (2005) 127–136

Commentary Article

Allowance allocation in the European emissions trading system: a commentary

Michael Grubb, Christian Azar and U Martin Persson

Received 19 January 2005 ; received in revised form 4 March 2005 ; accepted 10 March 2005

We review the total allocations under the EU ETS first phase and compare these against historical emissions, projections, and national Kyoto targets. We conclude that most Phase 1 allocations are excessive on all these measures, particularly the last, and argue that this is potentially damaging in several respects. We argue that: fundamentally different allocation methodologies (that avoid updating and referencing against projected emissions) must be considered for Phase 2; that industrial concerns about competitiveness should be carefully scrutinized on a specific sub-sector basis rather than taken as a generic reason for generous allocations; and that EU-level institutions should agree stronger guidelines to ensure a greater degree of coordination, comparability and transparency in Phase 2 national allocation plans.

Keywords: Emissions trading; CO₂ trading; National allocation plans; Greenhouse gas mitigation

download full article