DP5843 The Allocation of European Union Allowances. Lessons, Unifying Themes and General Principles

Author(s): Barbara Buchner, Carlo Carraro, A Denny Ellerman
Publication Date: September 2006
Keyword(s): allocation, climate change, emission trading, EU policy, fairness
JEL(s): C72, H23, Q25, Q28
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5843

This paper is the concluding chapter of Rights, Rents and Fairness: Allocation in the European Emissions Trading Scheme, edited by the co-authors and forthcoming from Cambridge University Press. The main objective of this paper is to distill the lessons and general principles to be learnt from the allocation of allowances in the European Union Emission Trading Scheme (EU ETS), i.e. in the world?s first experience with allocating carbon allowances to sub-national entities. We discuss the lessons that emerge from this experience and make some comments on what seem to be more general principles informing the allocation process and on what are the global implications of the EU ETS. As has become obvious during the first allocation phase, the diversity of experience among the Member States is considerable, so that it must be understood that these lessons and unifying themes are drawn from the experience of most of the Member States, not necessarily from all. Lessons and unifying observations are grouped in three categories: those concerning the conditions encountered, the processes employed, and the actual choices.