After Copenhagen and the Economic Crisis: Does the EU Need to Go Back to the Drawing Board?

For long, the EU has assumed leadership in advancing domestic and international climate change policy. Whilst pushing its negotiations partner in international negotiations, it has led the way in implementing a host of domestic measures including a unilateral legally binding target, an ambitious renewable energy policy, or a low-carbon technology deployment strategy. The centerpiece of EU policy however has been the EU Emissions Trading System (ETS), a cap-and-trade program launched in 2005. The ETS has been seen as a tool to ensure least-cost abatement, drive EU decarbonization, and develop a global carbon market. After an initial review of the ETS to come into force in 2013, there has been a belief that the new ETS is “future-proof”, meaning being able to cope with the temporary lack of a global climate change agreement and individual countries' emissions ceilings. This confidence has been shattered by the simultaneous “failure” of Copenhagen to deliver a robust perspective toward a global (top-down) agreement and the economic crisis. The lack of perspective for national caps at international level has led to a situation where many member states hesitate to pursue ambitious climate change policies. The economic crisis, which led to a dramatic fall of the EU allowance price until at least 2020 if not beyond, means that the ETS will not be able to deliver the second and third objectives, i.e. drive decarbonization and develop a global carbon market. This has triggered a debate across the EU on whether, and if so, how and when to adapt the EU ETS to accommodate the changed circumstances. It has also triggered a more fundamental discussion on the need of a price management mechanism and about the role of the ETS.