El sistema de comercio de derechos de emisión de la UE

The EU has decided to put a price on carbon, that is consistent with the advice that economists have been giving to climate policymakers for several decades. In 2018, William Nordhaus, a professor at Yale University, got the Nobel Prize for that reason. Now, the EU tried to put a price on carbon through taxation, through developing a carbon energy tax in the 1990s, but failed to finish that project because of the limited possibilities for the EU compared to the Member States’ competence in matters of taxation. In 1997, in the Kyoto Protocol, the United States pushed in the concept of emissions trading and they saw a system of emissions trading developing amongst countries, amongst parties to the Kyoto Protocol.

Now, in 2005, the EU changed track from taxation to emissions trading but with a significant difference and that is that companies would be the key players in a carbon market named the EU ETS. So, not countries but companies are the key players in the EU ETS. Now, the key of the ETS system is to define a cap, the cap is the total amount of emissions that is allowed in a certain year, and to define the sectors, that is, that are following under that cap. In that sense, the energy, the manufacturing industry and domestic aviation, or intra-EU aviation is covered by the EU ETS.

Now, that cap is translated into allowances and every single allowance represents one tonne of carbon and the total amount of allowances equals the cap. Now, these allowances are transferable, they can be traded and a price is being paid for that and the market has been developing over time and currently represents a market of over 200 billion.

What is the attraction of putting a price on carbon? The attraction is cost efficiency and the cost efficiency has been reached through the use of the EU ETS because a certain reduction is being produced, is being realized at the lowest cost possible because companies, who are the main actors under the EU ETS, can decide to reduce the emissions themselves when it is most attractive to them or, when it is on the contrary expensive for them to reduce emissions, they can buy allowances from someone else under the system for whom it is cheaper to reduce their emissions. So, it is a win-win system.

It is a system that produces the amount of emissions at the lowest cost possible and through reaching the lower cost we can have a higher willingness to pay for those allowances.