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The political economy of a tradable GHG permit market in the European Union

Author

Listed:
  • Markussen, Peter

    (Department of Economics, Aarhus School of Business)

  • Svendsen, Gert Tinggaard

    (Department of Economics, Aarhus School of Business)

  • Vesterdal, Morten

    (Department of Economics, Aarhus School of Business)

Abstract

The EU has committed itself to meet an 8% greenhouse gas (GHG) reduction target level following the Kyoto agreement. Therefore, the EU Commission has just proposed a new directive establishing a framework for GHG emissions trading within the European Union. This proposal is the outcome of a policy process started by the EU Commission and its Green Paper from March 2000. The main industrial stakeholders all had the opportunity to comment on the Green Paper and from their positions we will analyse how far they are winners or losers compared to the final directive proposal. Here, we find that the dominant interest groups indeed influenced the final design of an EU GHG market. This industrial rent-seeking most prominently lead to a grandfathered permit allocation rule like the one found in the US tradable permit systems.

Suggested Citation

  • Markussen, Peter & Svendsen, Gert Tinggaard & Vesterdal, Morten, 2002. "The political economy of a tradable GHG permit market in the European Union," Working Papers 02-3, University of Aarhus, Aarhus School of Business, Department of Economics.
    • Handle: RePEc:hhs:aareco:2002_003
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    File URL: http://www.hha.dk/nat/WPER/02-3_gts.pdf
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    References listed on IDEAS

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    1. Axel Michaelowa, 1998. "Climate policy and interest Groups—A Public choice analysis," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 33(6), pages 251-259, November.
    2. Greenwood, Justin & Webster, Ruth, 2000. "Are EU Business Associations Governable?," European Integration online Papers (EIoP), European Community Studies Association Austria (ECSA-A), vol. 4, February.
    3. Svendsen, Gert Tinggaard, 1999. "U.S. Interest Groups Prefer Emission Trading: A New Perspective," Public Choice, Springer, vol. 101(1-2), pages 109-128, October.
    4. Gert T. Svendsen, 1998. "public choice and environmental regulation," Books, Edward Elgar Publishing, number 1298.
    5. Carsten Daugbjerg & Gert Tinggaard Svendsen, 2001. "Green Taxation in Question," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-59553-8, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Urs Steiner Brandt & Gert Tinggaard Svendsen, 2004. "Rent-Seeking and Grandfathering: The Case of GHG Trade in the Eu," Energy & Environment, , vol. 15(1), pages 69-80, January.
    2. Sven Rudolph & Friedrich Schneider, 2011. "Did the Japanese Patient Follow the Doctor's Orders? Mostly no! A Public Choice Analysis of Greenhouse Gas Emissions Trading Schemes in Japan before and after the Earthquake," CESifo Working Paper Series 3639, CESifo.
    3. Andrea Kollmann & Friedrich Schneider, 2010. "Why Does Environmental Policy in Representative Democracies Tend to Be Inadequate? A Preliminary Public Choice Analysis," Sustainability, MDPI, vol. 2(12), pages 1-25, November.
    4. Axel Michaelowa & Sonja Butzengeiger, 2005. "EU emissions trading: navigating between Scylla and Charybdis," Climate Policy, Taylor & Francis Journals, vol. 5(1), pages 1-9, January.

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    More about this item

    Keywords

    Rent-seeking; European Union; political economy; Kyoto protocol; greenhouse gases; permit trading; grandfathering;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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