Harmonization versus decentralization in the EU ETS: an economic analysis

Pablo del R�o Gonz�lez

Climate Policy, 2006, vol. 6, issue 4, 457-475

Abstract: Although certain guidelines have been put forward by the European Commission, Member States (MS) have had a considerable degree of freedom to elaborate their national allocation plans (NAPs) and decide on key elements for the first commitment period of the EU emissions trading scheme (EU ETS)(2005-2007). While some favour this decentralized approach, arguing that it provides flexibility and allows the consideration of 'national circumstances', it may also bring many problems, in particular a possible distortion of sectoral competition. This article reviews and analyses the arguments for and against delegating the decision on key allocation elements to the MS, it discusses different degrees and alternatives for harmonization of those key elements, and analyses their pros and cons according to several criteria. The article concludes that harmonization is generally preferable to a decentralized approach, although this preference depends on the specific elements and on the assessment criteria considered.

Date: 2006
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DOI: 10.1080/14693062.2006.9685613

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