Columbia International Affairs Online: Working Papers

CIAO DATE: 07/2008

EU Emissions Trading: Challenges and Implications of National Implementation

Jacqueline Karas, Fiona Mullins

November 2003

Chatham House


Emissions trading is central to the European Union's (EU) strategy to meet its climate change commitments under the Kyoto Protocol. However, implementing the EU Directive on emissions trading ('the Directive') is proving extremely challenging for the governments involved. In particular, governments have to prepare National Allocation Plans (NAPs) for distributing emissions allowances to industry within a very tight timeframe. More than 12,000 industrial installations across the EU and accession countries will participate in the trading system.

There is strong impetus to begin the scheme on 1 January 2005. However, governments have to work within national decision-making processes in order to implement the Directive and these do not always fit well with the deadlines that the Directive imposes. The issues that need to be resolved in deciding allowance allocations have implications for national energy and climate change policy as well as industry competitiveness. This report draws on the experience of those involved in the allocation process and other experts to focus on the key issues to be resolved in implementing the Directive and their implications.