1. consequences of the climate change in the

1.  Introduction

Eruptions in Bali, dying Polar bears in the Arctic and increasing number of
animals in the Red List of endangered species and surprising natural events in
the United States: all these scenarios are consequences of the climate change
in the world. With increasing technologies, car usage and aviation, the
emission is increasing since decades. In July 2003, European lawmakers passed a
so-called Emissions Trading System (EU ETS) to fight against the climate change.1

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treaty sets regulations to reduce the emissions of greenhouse gases (GHG).
These are responsible for the warming on the planet which leads to climate
change. Nowadays, 28 EU member countries as well as Iceland, Norway and Liechtenstein
are participating in the EU ETS. The system covers 45% of the greenhouse gas
emissions of the European Union and limits emissions from industrial sites as
well as airlines.2

2.  THe EU ETS and
its origins

2.1 The Kyoto Protocol

origins of the EU ETS date back to December 1997. In Kyoto, Japan, the
international agreement called Kyoto Protocol was adopted, in February 2005 it
came into force.3  The Kyoto Protocol was established under the
United Nations Framework Convention on Climate Change (UNFCC). As the only
legally mandatory convention worldwide, it states that the participating
countries should reduce their GHG emissions.4
 As mostly developed countries are responsible
for the high levels of GHG emissions, those nations have a more massive burden.5
The Kyoto Protocol is divided into commitment periods. The greenhouse gas
emissions should have been reduced by 5% in the first period, compared to the
level of 1990. At that time, the 15 EU member countries agreed to lower their
emissions as a whole by 8%. Some EU member countries received individual
emission targets, depending on the relative wealth. In this first period, from
2008 until 2012, the targets were achieved and the emissions even cut by 11.7%.6
The 2nd commitment
period of the Kyoto Protocol lasts from 2013 until 2020, when the new global
agreement will start. The reduction target for EU countries amounts to 20%
compared to 1990 level.7

2.2 Start of EU

In October 2001, the
European Union Emission Trading System was proposed, 2005 the system got
The implementation is divided into trading periods, or phases. The first
trading period lasted from 2005 until 2007.9
The phase was used to test the system and make sure to meet the requirements of
the Kyoto Protocol.10
From 2008 until 2012 the second trading period followed. 11
The cap was being decreased and next to CO2 emissions, N2O
emissions were added.12
Right now runs phase 3 from 2013 and 2020.13
The third phase is based on lessons learned from the previous periods. It added
aircraft and another GHG to the EU ETS.14
The system does not have an ending and will continue.15

3.  How does it

The European Union set up a
cap-and-trade system for CO² and other greenhouse gas emissions.16
There is a
cap on the GHG emissions which limits industries, countries and companies in
pollution. If the cap is exceeded, penalties have to be paid.17
To lower emissions, the caps are being reduced.18
Each member state of the EU ETS gives its facilities a certain number of
European Union Allowances (EUAs) – some for free, some can be bid in auctions.
By selling and buying these allowances, a price for emissions is being created.
This price functions as incentive for companies to reduce emissions in a
cost-effective way.20
When the emissions are being reduced and there are allowances over, the can be
used in the future or sold to another company.21
It affects aircraft operators and installations as they produce about 50% of all
EU GHG emissions.22
In the EU ETS, 12.000 facilities in the EU have received a cap on CO2.
Measuring and reporting the CO2 emission amounts is obligatory.23
Every state proposed a number of allowances and the European Commissions had to
approve it. Each of the three periods had a different length and different caps
were determined.24
By setting up the ETS, the EU encourages the industry to invest in eco-friendly
measures and reduction of costs. Revenues are being given to projects and
programs for renewable energies or low carbon.25

1 cf.
Simon Evans, “Q&A: Will the reformed
EU Emissions Trading System raise carbon prices?,” in CarbonBrief,  December
6, 2017
accessed December 23, 2017.

2 cf.
European Commission, “The EU Emissions
Trading System (EU ETS),” 2016,
accessed December 23, 2017.

3 cf.
United Nations Climate Change, “Kyoto
Protocol,” accessed
December 26, 2017.

4 cf.
European Commission, “Kyoto 1st
commitment period (2008-12),”

accessed December 23, 2017.

5 cf. United
Nations Climate Change, “Kyoto Protocol”.

6 cf.
European Commission, “Kyoto 1st
commitment period (2008-12)”.

7 cf.
European Commission, “Kyoto 2nd
commitment period (2013-20),”,

accessed December 26, 2017.

8 cf. A. Denny Ellerman and Paul L. Joskow, “The European Union’s Emissions Trading System
in Perspective,” Massachusetts Institute of Technology, May 2008,

accessed December 24, 2017.

9 cf. European Commission, “EU ETS Handbook,”
accessed January 1, 2018, 4.

10 cf. Ibid., 7.

11 cf. Ibid., 4.

12 cf. Ibid.,

13 cf. Ibid.,

14 cf. Ibid.,

15 cf.
Ibid., 7.

16 cf. Ellerman
and Joskow, “The European Union’s
Emissions Trading System in Perspective”.

17 cf. EDF,
“How cap and trade works,”
accessed December
26, 2017.

18 cf.
European Commission, “The EU Emissions
Trading System,” accessed
January 11, 2018.

cf. Umwelt Bundesamt, “Der Europäische Emmissionshandel,” September 01, 2017,
< https://www.umweltbundesamt.de/daten/klima/der-europaeische-emissionshandel#textpart-1>
accessed January 16, 2018.

20 cf. EDF,
“How cap and trade works”.

21 cf. European
Commission, “The EU Emissions Trading

22 cf. European
Commission, “EU ETS Handbook,” 4.

23 cf. Ellerman
and Joskow, “The European Union’s
Emissions Trading System in Perspective”, 1-2.

24 cf. Ibid.,

25 cf. European
Commission, “EU ETS Handbook,” 14.


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