The EU Emissions Trading System: New Inquiry

The EU ETS is the principal policy instrument for climate change mitigation in the EU. This inquiry will investigate whether the system can deliver the EU’s climate change mitigation goals in the absence of a legally-binding international emissions reduction commitment.

The EU ETS is closely linked to the international climate change mitigation regime. Through the Linking Directive, the EU ETS accepts offsets from the flexible mechanisms of the Kyoto Protocol. The EU market has provided the core of international demand in these schemes. More broadly, the EU ETS has provided a model for the consideration of cap-and-trade schemes around the world.

The scheme was intended to form the core of a global carbon market, but is looking increasingly isolated after the failure to achieve binding emissions reduction commitments under the United Nations Framework Convention on Climate Change (UN FCCC) for the period after 2012, when the first commitment period of the Kyoto Protocol comes to an end.

The lack of an international framework for emissions reductions and carbon trading poses some serious difficulties for the future viability of the EU ETS, particularly associated with carbon leakage, comparability of effort and access to other viable emissions trading schemes.

What should submissions cover?

Respondents are free to comment on any issues they consider relevant, although the Committee particularly welcomes evidence addressing some or all of the following questions:

• Does the EU ETS remain a viable instrument for climate change mitigation in the EU?
• Can the EU ETS operate effectively in a world without legally-binding emissions reduction commitments and other cap-and-trade schemes?
• What reduction in emissions will the EU ETS deliver in Phase III, within the EU and abroad?
• Could the environmental  and economic efficiency of the EU ETS be improved by linking with other emissions trading schemes and how can this be achieved?
• What actions should the UK and the EU be taking to promote the development of compatible ETSs internationally?
• Could sectoral agreements form part of the future of the EU ETS?
• Will the EU ETS be able to access viable alternatives to international credits without the Clean Development Mechanism?
• Is the EU ETS a constraint on unilateral action to reduce emissions and, on the other hand, how are Member States’ own policies affecting the operation of the trading system?
• How serious an impact have the recent cases of fraud had on confidence in the EU ETS? Are further improvements in security and auditing required?
• How can the EU ETS be strengthened to operate effectively in a world without legally binding emissions reduction obligations?

This inquiry forms the first part of a two-part inquiry into low-carbon cooperation. The second part of this inquiry will investigate whether bilateral and sectoral agreements with key developing countries such as China would be a more effective means of reducing emissions.

Written evidence is invited from interested parties. The deadline for the submission of written evidence is Friday 12 August.

Notes on submitting written evidence

Written evidence should be in Word or rich text format - please no PDFs - and sent to ecc@parliament.uk. The body of the e-mail must include a contact name, telephone number and postal address. The e-mail should also make clear who the submission is from. Hard copy submissions should be sent to: The Clerk, Energy and Climate Change Committee, 7 Millbank, London, SW1P 3JA. The deadline is Friday 12 August 2011. As a guideline submissions should be no longer than 3000 words. However, please contact the Committee staff if you wish to discuss this matter.

Sumissions should be in the format of a self-contained memorandum. Paragraphs should be numbered for ease of reference, and the document should, if possible, include an executive summary. Submissions should be original work, not previously published or circulated elsewhere. Once submitted, your submission becomes the property of the Committee and no public use should be made of it unless you have first obtained permission from the Clerk of the Committee. Please bear in mind that Committees are not able to investigate individual cases.

The Committee normally, though not always, chooses to publish the written evidence it receives, either by printing the evidence, publishing it on the internet or by making it publicly available through the Parliamentary Archives. If there is any information you believe to be sensitive you should highlight it and explain what harm you believe would result from its disclosure; the Committee will take this into account in deciding whether to publish or further disclose the evidence.

For data protection purposes, it would be helpful if individuals wishing to submit written evidence send their contact details in a covering letter. You should be aware that there may be circumstances in which the House of Commons will be required to communicate information to third parties on request, in order to comply with its obligations under the Freedom of Information Act 2000.

Further information

• About Parliament: Select Committees
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