A novel methodology for public management of annual greenhouse gas emissions in the European Union

Global warming and climate change, as a result of greenhouse gas emissions, pose a major threat to the international community; therefore, such emissions must be reduced by moving to clean energy resources. In this paper, we follow an approach based on bankruptcy models using the proportional rule and the proportional run-to-the-bank rule to illustrate a novel allocation protocol for managing annual CO2 equivalent emissions in European Union countries among a set of sectors included in Annex I to Decision No 406/2009/EC. Unlike the standard bankruptcy model, the current model deals with situations in which agent’s claims are multi-dimensional and the issues correspond to greenhouse gases contained in Annex II to Directive 2003/87/EC. Considering that any Member State can limit the greenhouse gas emissions beyond their obligations under the European legislation, being able to establish national greenhouse gas emission reduction objectives in relation to 2005. Two types of situations will be considered to allocate emissions among greenhouse gases, sectors and source categories: when total emissions and removals from activities related to the Land Use, Land-Use Change and Forestry are excluded, we will make a first allocation among sectors and categories to determine the amount of tonnes of CO2 equivalent that they can emit for each greenhouse gas; and when land-use/forestry activities are taken into account for the distribution of emissions reduction efforts, we will make a second allocation among sectors in order to determine which source categories are involved in each case.