New reforms to the EU’s emissions trading system are welcome, but the devil will be in the details

August 11, 2015

The EU’s emissions trading system employs a ‘cap and trade’ framework under which a ‘cap’ on the level of greenhouse gas emissions is set, with allowances for emissions becoming tradable between business and other actors. Since the financial crisis, however, a surplus of emission allowances has built up, undermining the effectiveness of the system. Luca Taschini from the ENTRACTE partner institution LSE writes on a recent proposal, approved in the European Parliament on 8 July 2015, to tackle this problem by creating a so called ‘Market Stability Reserve’. He argues that while this should be seen as a positive development, its impact will depend heavily on the details of the reform that are eventually agreed between national governments.

Please read the entire article published on LSE’s blog and Graham Institute news.