Towards a CO2 market in the EU: the case of electric utilities

✍ Scribed by Svendsen, Gert Tinggaard

• Publisher: John Wiley and Sons
• Year: 1998
• Tongue: English
• Weight: 167 KB
• Volume: 8
• Category: Article
• ISSN: 0961-0405
• DOI: 10.1002/(sici)1099-0976(199807/08)8:4<121::aid-eet158>3.0.co;2-t

✦ Synopsis

CO 2 emission taxation has in general failed in the EU. Even a potential CO 2 tax with a full refund of revenues is hardly politically feasible because the few and large capital-intensive 'losers' will oppose it more strongly than the numerous and small 'winners' who will promote it. The grandfathering of CO 2 permit rights may alternatively be the politically and administratively most feasible solution for regulating CO 2 in the EU for three reasons: First, no revenue needs to be redistributed. Second, the institutional structure in the EU allows that a permit market, as a non-fiscal measure, may be adopted by majority voting rather than unanimity. Third, the free-rider problem may be overcome by allocating a relatively larger amount of permits to the most reluctant EU members than their historical emission levels qualify them for. Based on the experience of the US Acid Rain Program (ARP), a suitable starting point for a potential CO 2 market in the EU could be the electric utility industry as regulated by the European Environment Agency.