Economisation of European Environmental law — Emissions Trading as legal instrument (December 2008)

With the implementation of the European Emissions Trading Scheme (EU ETS), European environmental law has become experimental ground. A new instrument has been introduced to regulate the emission of greenhouse gases. Tradable permits, a market-based instrument and favoured by economists, has replaced the traditional regulatory instruments. Economic theory suggests that the potential of the EU ETS to solve problems of climate protection is comparatively high. It is the cornerstone of European climate protection policy, and has also qualified as the prototype of architecture for a global climate regime. One main question is how the trading scheme should be shaped and executed in order to respect legal criteria. The first lessons were learned after the first and in the early stages of the second trading period under the EU ETS. However, it is undecided how this instrument can be improved. The starting point for such considerations must be the implementation of the ETS and therefore Directive 2003/87/EC (ETS Directive). As a result of balancing various interests, the Directive is a compromise and lacks specificity in many sections. The Directive is currently about to be revised for the third trading period, starting in 2012. Additionally, since this European pioneer project shall be instructive for an eventual worldwide system, it is time to put the EU ETS to the test. The article puts several elements of the trading scheme to the test: the legal framework; the experience obtained with certificate systems at the national level (the US, the UK and Denmark); conflicts between the EU ETS and the fundamental rights in relation to European law and finally, possible conflicts with international trade law.