New Report Published on "Ten Insights From Europe on the European Union Emissions Trading Scheme"

Since 2005, the European Union has had in place an emissions trading scheme (ETS) aimed at reducing green house gas emissions. From that point until now, the EU has "accumulated a rich experience with designing and implementing a cap-and-trade program."

A recently published report, "Climate Change Policy and Industrial Competitiveness: Ten Insights From Europe on the EU Emissions Trading Scheme," provides insight into the ETS and "suggests key lessons relevant to current U.S. [climate change related] debates" as well as some recommendations.

The report was written by a team headed by Michael Grubb, the chief economist for the U.K.-based Carbon Trust and a highly regarded expert on emissions trading. The report was commissioned by the German Marshall Fund of the United States.

Among some of the report's observations:

• Emissions trading works: European emissions have been reduced by 120-300 million metric tons of carbon dioxide during the first phase of the ETS, according to an MIT study.


• The impact on gross domestic product is small: "Don't let concerns about macroeconomic impacts dictate the environmental targets," the report says. "Economic impacts have been consistently less than projected."


• Competitiveness impacts are limited to a relatively small group of industries: Tailored solutions to those industries that are involved in international business should be considered.


• Windfall profits may result if too many free allocations are handed out (oh what a difficult lesson the Europeans learned on this one...my comment, not the authors').


• Auctioning of allocations should be maximized.

Those interested in how the European experience might inform the debate in the U.S. should definitely read this report.