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Harmonization versus decentralization in the EU ETS: an economic analysis

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  • Pablo del R�o Gonz�lez

Abstract

Although certain guidelines have been put forward by the European Commission, Member States (MS) have had a considerable degree of freedom to elaborate their national allocation plans (NAPs) and decide on key elements for the first commitment period of the EU emissions trading scheme (EU ETS)(2005-2007). While some favour this decentralized approach, arguing that it provides flexibility and allows the consideration of 'national circumstances', it may also bring many problems, in particular a possible distortion of sectoral competition. This article reviews and analyses the arguments for and against delegating the decision on key allocation elements to the MS, it discusses different degrees and alternatives for harmonization of those key elements, and analyses their pros and cons according to several criteria. The article concludes that harmonization is generally preferable to a decentralized approach, although this preference depends on the specific elements and on the assessment criteria considered.

Suggested Citation

  • Pablo del R�o Gonz�lez, 2006. "Harmonization versus decentralization in the EU ETS: an economic analysis," Climate Policy, Taylor & Francis Journals, vol. 6(4), pages 457-475, July.
    • Handle: RePEc:taf:tcpoxx:v:6:y:2006:i:4:p:457-475
    DOI: 10.1080/14693062.2006.9685613
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    References listed on IDEAS

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    1. Kruger, Joseph & Pizer, William A., 2004. "The EU Emissions Trading Directive: Opportunities and Potential Pitfalls," Discussion Papers 10679, Resources for the Future.
    2. Sato, S. & Grubb, M. & Cust, J. & Chan, K. & Korppoo, A. & Ceppi, P., 2007. "Differentiation and dynamics of competitiveness impacts from the EU ETS," Cambridge Working Papers in Economics 0712, Faculty of Economics, University of Cambridge.
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    Cited by:

    1. Stephen Lecourt & Clément Pallière & Oliver Sartor, 2013. "The impact of emissions-performance benchmarking on free allocations in EU ETS Phase 3," RSCAS Working Papers 2013/17, European University Institute.
    2. Stephen Lecourt & Clement Palliere & Oliver Sartor, 2013. "Free allocations in EU ETS Phase 3: The impact of emissions-performance benchmarking for carbonintensive industry," Working Papers 1302, Chaire Economie du climat.
    3. Michael Grubb & Karsten Neuhoff, 2006. "Allocation and competitiveness in the EU emissions trading scheme: policy overview," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 7-30, January.

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