Spatially-explicit footprints of agricultural commodities: Mapping carbon emissions embodied in Brazil's soy exports

Reliable estimates of carbon and other environmental footprints of agricultural commodities require capturing a large diversity of conditions along global supply chains. Life Cycle Assessment (LCA) faces limitations when it comes to addressing spatial and temporal variability in production, transportation and manufacturing systems. We present a bottom-up approach for quantifying the greenhouse gas (GHG) emissions embedded in the production and trade of agricultural products with a high spatial resolution, by means of the integration of LCA principles with enhanced physical trade flow analysis. Our approach estimates the carbon footprint (as tonnes of carbon dioxide equivalents per tonne of product) of Brazilian soy exports over the period 2010–2015 based on ~90,000 individual traded flows of beans, oil and protein cake identified from the municipality of origin through international markets. Soy is the most traded agricultural commodity in the world and the main agricultural export crop in Brazil, where it is associated with significant environmental impacts. We detect an extremely large spatial variability in carbon emissions across sourcing areas, countries of import, and sub-stages throughout the supply chain. The largest carbon footprints are associated with municipalities across the MATOPIBA states and Pará, where soy is directly linked to natural vegetation loss. Importing soy from the aforementioned states entailed up to six times greater emissions per unit of product than the Brazilian average (0.69 t t⁻¹). The European Union (EU) had the largest carbon footprint (0.77 t t⁻¹) due to a larger share of emissions from embodied deforestation than for instance in China (0.67 t t⁻¹), the largest soy importer. Total GHG emissions from Brazilian soy exports in 2010–2015 are estimated at 223.46 Mt, of which more than half were imported by China although the EU imported greater emissions from deforestation in absolute terms. Our approach contributes data for enhanced environmental stewardship across supply chains at the local, regional, national and international scales, while informing the debate on global responsibility for the impacts of agricultural production and trade.     

The impact of administrative transaction costs in the EU emissions trading system

This article empirically investigates the impact of transaction costs for monitoring, reporting, and verification (MRV) of emissions on companies regulated by the EU Emissions Trading System (EU ETS) in Germany. Based on a unique panel dataset, we investigate if MRV costs are dependent on the amount of annual emissions of regulated companies and if there are differences in transaction costs between economic sectors. The results indicate that administrative costs are dependent on the amount of annual emissions for larger companies, which has implications for the economic efficiency of the EU ETS. The most important finding, however, is that there are significant differences in MRV transaction costs dependent on the type and size of companies. This implies the existence of considerable economies of scale. Overall, the EU ETS could benefit from reforms by means of a push towards upstream regulation as this would likely increase administrative efficiency.

Policy relevance statement

Transaction costs are, among other things, an important aspect of market-based climate policy design. A policy instrument with low transaction costs is preferred over instruments with larger transaction costs under equal conditions. This is occasionally referred to as administrative efficiency, and its importance was acknowledged in directive 2009/29/EC of the European Commission. Thoughtful empirical examination of transaction costs is essential in order to inform about the extent and impact of these costs. This article provides an analysis of transaction costs for monitoring, reporting, and verification (MRV) of emissions in the EU ETS. It is shown that administrative costs will likely have negative effects on the cost efficiency of the EU ETS. However, the most relevant finding is that small companies (<250 employees) or firms emitting small amounts of carbon dioxide per year face far higher average transaction costs compared with larger firms or emitters. Thus, there is a tendency for the EU ETS to cause MRV transaction costs that are disadvantageous for small companies. A regulation that is more upstream-oriented could mitigate this negative effect to some extent. The EU ETS could initiate a reform that is targeted on putting a price on the carbon content of fossil fuels instead of directly regulating emissions in a so-called ‘end-of-the-pipe’ way at the installation level.     

Spatially explicit assessment of water embodied in European trade: A product-level multi-regional input-output analysis

Responsible water management in an era of globalised supply chains needs to consider both local and regional water balances and international trade. In this paper, we assess the water footprints of total final demand in the EU-27 at a very detailed product level and spatial scale—an important step towards informed water policy. We apply the multi-regional input-output (MRIO) model EXIOBASE, including water data, to track the distribution of water use along product supply chains within and across countries. This enables the first spatially-explicit MRIO analysis of water embodied in Europe’s external trade for almost 11,000 watersheds world-wide, tracing indirect (“virtual”) water consumption in one country back to those watersheds where the water was actually extracted. We show that the EU-27 indirectly imports large quantities of blue and green water via international trade of products, most notably processed crop products, and these imports far exceed the water used from domestic sources. The Indus, Danube and Mississippi watersheds are the largest individual contributors to the EU-27’s final water consumption, which causes large environmental impacts due to water scarcity in both the Indus and Mississippi watersheds. We conclude by sketching out policy options to ensure that sustainable water management within and outside European borders is not compromised by European consumption.     

Carbon dioxide emissions from Russia's electricity sector: future scenarios

Abstract

This article investigates future greenhouse gas emission scenarios for Russia's electricity sector, a topic of importance since Russia's ratification of the Kyoto Protocol in November 2004. Eleven scenarios are constructed to the year 2020 considering economic and technological details in both the demand and supply sides of the sector. The scenarios are based upon a thorough review of the different factors controlling carbon dioxide emissions, including potential economic growth, changes in energy efficiency and technological development, and that Russia may export large amounts of natural gas to European and Asian markets. The most likely scenario is that Russia will double industrial output over the next 10 years, increase energy efficiency in the demand sector, will remain consistent to the goals of the Energy Strategy 2020 and will implement more efficient technology in the electricity supply sector. Consequently, carbon dioxide emissions will still be 102 million tonnes below 1990 levels in 2010, representing a significant source for emission reduction credits available to be sold on international markets or transferred to the next crediting period.     

Agricultural and forestry trade drives large share of tropical deforestation emissions

Deforestation, the second largest source of anthropogenic greenhouse gas emissions, is largely driven by expanding forestry and agriculture. However, despite agricultural expansion being increasingly driven by foreign demand, the links between deforestation and foreign demand for agricultural commodities have only been partially mapped. Here we present a pan-tropical quantification of carbon emissions from deforestation associated with the expansion of agriculture and forest plantations, and trace embodied emissions through global supply chains to consumers. We find that in the period 2010–2014, expansion of agriculture and tree plantations into forests across the tropics was associated with net emissions of approximately 2.6 gigatonnes carbon dioxide per year. Cattle and oilseed products account for over half of these emissions. Europe and China are major importers, and for many developed countries, deforestation emissions embodied in imports rival or exceed emissions from domestic agriculture. Depending on the trade model used, 29–39% of deforestation-related emissions were driven by international trade. This is substantially higher than the share of fossil carbon emissions embodied in trade, indicating that efforts to reduce greenhouse gas emissions from land-use change need to consider the role of international demand in driving deforestation. Additionally, we find that deforestation emissions are similar to, or larger than, other emissions in the carbon footprint of key forest-risk commodities. Similarly, deforestation emissions constitute a substantial share (˜15%) of the total carbon footprint of food consumption in EU countries. This highlights the need for consumption-based accounts to include emissions from deforestation, and for the implementation of policy measures that cross these international supply-chains if deforestation emissions are to be effectively reduced.     

Effects of economic recession and local weather on climate change attitudes

How are large companies responding to the challenges of reducing their greenhouse gas (GHG) emissions? An analysis of the published climate change policies and performance of 125 large European companies is presented. The results suggest that most large European companies have now developed the management systems and processes necessary for them to effectively manage their GHG emissions and related business risks. However, there is a significant disconnect between the targets that companies set for themselves and the more ambitious targets being set by the European Union (which has committed to a 20% reduction in its emissions by 2020 against a 1990 baseline). Of the companies surveyed, just over one-third had stabilized or reduced their total GHG emissions over the period 2002–2007, and fewer than one-third expected their emissions to stabilize or reduce in the coming years. The relationship between the quality of corporate policies and performance outcomes (in terms of GHG emissions) suggests that while companies with stronger policies are likely to have relatively better performance, only a minority of those companies with the highest-quality policies are committing to absolute reductions in their GHG emissions.     

EU emissions trading and the cement sector: a spatial competition analysis

An oligopoly competition model is described and used to illustrate the potential effect of EU emissions trading and transport issues on the production decisions and profitability of cement producers in a typical western European country market. The role of geography is introduced from three viewpoints: the existence of regional markets, the fact that EU producers may operate multiple plants across these regions, and the possibility of production capacity constraints. A typical EU state is divided into a coastal region which is initially exposed to international competition, and an inland region which is initially protected. Assuming pure auctioning of EU Allowances and a range of CO₂ prices up to €50/t, our model predicts a large increase of imports into the coastal region. Consequences for the inland producers include reduced attractiveness of the coastal market, as well as increased competition from coastal producers and from non-EU imports. The model includes a number of simplifications and therefore does not claim to offer definitive predictions, but our results do suggest that an increase in non-EU imports could feasibly offset more than 70% of the decrease in EU cement sector emissions. The likely impact on producer profits is considered for each region, and the advantages and disadvantages of potential mitigating policy measures are reviewed for either the EU Allowance allocation process or border adjustments on cement products.     

Scaling up zero-deforestation initiatives through public-private partnerships: A look inside post-conflict Colombia

The rise of public and private zero-deforestation commitments is opening a new collaborative space in global forest governance. Governments seeking to reduce national greenhouse gas emissions by protecting and restoring forests are partnering with companies motivated to eliminate deforestation from supply chains. The proliferation of zero-deforestation initiatives is creating opportunities for policy synergies and scaling up impacts, but has led to a more complex regulatory landscape. Drawing on policy analysis and expert interviews, we explore public-private policy interactions in Colombia as a case study for tropical forested nations with interest in aligning climate, forest, and development goals. We consider how zero-deforestation priorities are set on the national agenda and scaled up through public-private partnerships. We identify zero-deforestation initiatives in three overlapping governance domains—domestic public policy, REDD+, sustainable supply chain initiatives—and highlight ten multi-stakeholder pledges that have catalyzed supporting initiatives at multiple scales. Emerging from decades of armed conflict, Colombia is pursuing a peace building model based on low-emissions rural development. The peace deal provided a focusing event for zero-deforestation that converged with political momentum and institutional capacity to open a policy window. A government pledge to eliminate deforestation in the Colombian Amazon by 2020 set the national agenda and stimulated international REDD+ cooperation. Lessons from Colombia show that governments provide important directionality among the proliferation of zero-deforestation initiatives. Public pledges and the orchestration of actors through public-private partnerships allow governments to scale up efforts by aligning transnational activities with national priorities. The case of Colombia serves as a potential zero-deforestation model for other nations, but challenges around equitable land tenure, illegality, and enforcement must be overcome for multi-stakeholder initiatives to produce long-term change.     

Can U.S. multi-state climate mitigation agreements work? A perspective from embedded emission flows

Subnational and non-governmental actors are expected to provide important contributions to broader climate actions. A consistent and accurate quantification of their GHG emissions is an important prerequisite for the success of such efforts. However, emissions embodied in domestic and international supply chains, that can undermine the effectiveness of climate agreements, add challenges to the quantification of emissions originating from the consumption of goods and services produced elsewhere. We examine emission transfers between the states that have joined the U.S. Climate Alliance (USCA) and others. Our results show that states pledging to curb emissions consistent with the Paris Agreement were responsible for approximately 40% of total U.S. territorial GHG emissions. However, when accounting for transferred emissions through international and interstate supply chains of the products they consume, the share of Alliance states increased to 52.4% of the national total GHG emissions. The consumption-based emissions for some Alliance states, such as Massachusetts and New York, could be more than 1.5 times higher than their production-based emissions. Our detailed sectoral analysis highlights the challenges facing such agreements to extend cooperation in the future for larger joint benefit given the potential for carbon leakage from member states implementing stricter environmental policies that could lead to higher emissions from non-member states. It is critical for these arrangements to pay close attention to transferred emissions.     

The Korean emissions trading scheme: business perspectives on the early years of operations

Korea’s domestic emissions trading scheme commenced in January 2015. It targeted mainly industrial and power sectors, and compelled companies to transform how they manage energy efficiency and mitigate GHGs. This study sets out to explore how Korean companies evaluated their allocation position and engaged in emissions trading in the first compliance period, and to identify their views on trading barriers and policy expectations at the start of emissions trading. Questionnaire surveys and on-site interviews targeting Korean companies under the Korean emissions trading scheme were conducted at the start of operations (February to March 2015) and after the first compliance year (May 2016), respectively. Actual operation results are observed and compared with the survey findings. This study extrapolates implications for policy and presents suggestions for the government and the target companies in terms of how to improve the current emissions trading scheme in order to further stimulate emissions trading.

POLICY RELEVANCE

This study attempts to bridge the gap between companies and government policy in operating the domestic emission trading scheme in Korea. Empirical results, based on analysis of company-level data, reveal how businesses perceive K-ETS and how this relates to the operating results, which saw only limited trading of surplus emissions taking place in the early phase. Key barriers to active trading identified in the study include supply–demand imbalance, policy uncertainty and lack of preparedness of companies over carbon pricing. These barriers could be addressed by improved transparency of allowance allocation methods, possibly restricting carry-over of surplus allowances, ending policy uncertainty and providing more information to companies that can support companies’ policy understanding of the carbon pricing based on the market mechanism. Targeted companies should proactively participate in emissions trading in the early phase, in order to learn from it and prepare for the future introduction of auctioning.     

欧盟《气候与能源2030政策框架》要点分析与启示

通过分析《气候与能源2030政策框架》（以下简称《框架》）方案要点,认为欧盟2030年的减排目标相对2020年承诺目标更为积极,可再生能源目标略高于之前官方预期。由于东欧国家的参与,欧盟一方面获得了这些国家盈余的排放配额,帮助欧盟作为一个整体实现减排目标;另一方面,成员国经济发展水平差异增大,导致欧盟施行相对积极的环境政策阻力加大,未来大幅调整减排目标的可能性不大。《框架》目标将可能对2020年后国际碳市场需求预估产生影响,未来国际碳市场的健康运行,将不仅需要欧盟外的发达国家提出具有雄心的减排目标,也需要欧盟提高减排目标,增加其对于国际减排配额的需求;此外,欧盟辅助实现40%减排目标的相关生产标准和措施,可能对未来全球自由贸易产生影响,其他国家尤其是对外贸易依存度较高的发展中国家需要密切关注相关动向。《框架》方案所提出的以应对气候变化引领和促进经济发展、采用组合目标且针对不同目标采取不同实现形式、展现制定目标的透明度、充分考虑成员国差异等提法和操作方式值得中国借鉴。     

欧盟航空碳税及其国际影响

根据当前欧盟征收国际航空碳税政策的国际环境,介绍欧盟航空碳税的历史沿革、具体政策、二氧化碳排放监测方法,就各国反应及其国际影响进行分析.欧盟航空碳税可能会导致全球航空业成本增加,并最终转嫁给消费者;欧盟航空碳税对发达国家航空公司影响较小,而对发展中国家的航空公司影响较大.鉴于欧盟航空碳税对中国航空业的影响,建议尽早制定相关的碳排放标准,维护中国应有的发展权与话语权.     

Estimating greenhouse gas emissions from cattle raising in Brazil

The study estimated, for the first time, the greenhouse gas emissions associated with cattle raising in Brazil, focusing on the period from 2003 to 2008 and the three principal sources: 1) portion of deforestation resulting in pasture establishment and subsequent burning of felled vegetation; 2) pasture burning; and 3) bovine enteric fermentation. Deforestation for pasture establishment was only considered for the Amazon and Cerrado. Emissions from pasture burning and enteric fermentation were accounted for the entire country. The consolidated emissions estimate lies between approximately 813 Mt CO₂eq in 2008 (smallest value) and approximately 1,090 Mt CO₂eq in 2003 (greatest value). The total emissions associated with Amazon cattle ranching ranged from 499 to 775 Mt CO₂eq, that of the Cerrado from 229 to 231 Mt CO₂eq, and that of the rest of the country between 84 and 87 Mt CO₂eq. The full set of emissions originating from cattle raising is responsible for approximately half of all Brazilian emissions (estimated to be approximately 1,055 Mt CO₂eq in 2005), even without considering cattle related sources not explicitly estimated in this study, such as energy use for transport and refrigeration along the beef and derivatives supply chain. The potential for reduction of greenhouse gas emissions offered by the Brazilian cattle industry is very high and might constitute Brazil’s most important opportunity for emissions mitigation. The study offers a series of policy recommendations for mitigation that can be implemented by public and private administrators at a low cost relative to other greenhouse gas reduction options.     

EU ETS试验阶段微观交易大数据分析及其对中国的启示

通过对欧盟独立交易登记系统（CITL）的抓取、识别、清洗与融合构建了全样本的交易大数据集合,完整地重现了欧盟碳排放权交易体系（EU ETS）在试验阶段的市场微观结构。进而从市场内部微观视角出发,对EU ETS的市场微观体系、排放企业的微观交易行为,以及市场供需微观演化等予以分析,结果表明在市场建立初期：排放企业的交易大多是以配额履约为目的;交易行为呈现活跃度低、季节性和同向性的特点;市场上少量的高排放企业凭借其在配额总量、资金和信息上的优势在交易中占据了主导地位。此外,微观行为数据还反映了金融部门在碳配额交易中的作用：配额在前期流向金融部门使得供过于求的状况有所缓解,但当配额流出金融部门时,市场供需失调的情况被迅速放大。在碳市场建立初期,理解EU ETS市场参与者微观行为特点以及潜在的风险,对中国即将启动的全国统一碳排放权交易体系的机制设计有重要的启示意义。     

Complex resource supply chains display higher resilience to simulated climate shocks

Global resource supply chains deliver products such as fish, rice and minerals from producers to consumers around the world, linking disparate regions and economies. These supply chains are increasingly exposed to the impacts of a changing climate, yet receive little attention relative to the study of the production phase. Too often, business learns from experience if and how their supply chains can withstand and recover from climate shocks with little insight on proactively developing climate resilient supply chains. We use a network-based simulation approach to estimate the resilience of supply chains, particularly to disruption experienced during climate-related extreme events. We consider supply chain examples from three Australian resource industries – fisheries, agriculture and mining – that have experienced climate shocks in recent years. We derive four supply chain indices – evenness, resilience, continuity of supply and climate resilience – to estimate the performance of simple and complex supply chains in each industry. As with ecological systems, we show that complex supply chains with a large number of nodes and links are more resilient to disruption. Critically, all chains, regardless of their complexity, will have diminished resilience as climate disruptions become more frequent. This highlights the importance of considering the broader economic benefits of diversified chains, leading to risk reduction and improved design post-disruption. It also reinforces the importance of a systems approach to risk management in supply chains, particularly in considering adaptation options for addressing direct and indirect impacts on the chain as well as the global challenge of reducing greenhouse gas emissions.     

Analysis of change in relative uncertainty in GHG emissions from stationary sources for the EU 15

Total uncertainty in greenhouse gas (GHG) emissions changes over time due to “learning” and structural changes in GHG emissions. Understanding the uncertainty in GHG emissions over time is very important to better communicate uncertainty and to improve the setting of emission targets in the future. This is a diagnostic study divided into two parts. The first part analyses the historical change in the total uncertainty of CO₂ emissions from stationary sources that the member states estimate annually in their national inventory reports. The second part presents examples of changes in total uncertainty due to structural changes in GHG emissions considering the GAINS (Greenhouse Gas and Air Pollution Interactions and Synergies) emissions scenarios that are consistent with the EU’s “20-20-20” targets. The estimates of total uncertainty for the year 2020 are made under assumptions that relative uncertainties of GHG emissions by sector do not change in time, and with possible future uncertainty reductions for non-CO₂ emissions, which are characterized by high relative uncertainty. This diagnostic exercise shows that a driving factor of change in total uncertainty is increased knowledge of inventory processes in the past and prospective future. However, for individual countries and longer periods, structural changes in emissions could significantly influence the total uncertainty in relative terms.     

Exploring future copper demand,recycling and associated greenhouse gas emissions in the EU-28

Copper is widely used in modern technology, but declining ore grades and depletion of natural deposits have raised concerns regarding sustainable demand-supply balance in the long term. The vulnerability to primary copper supply restrictions amplifies for countries dependant on imports, notably many EU Member States. Recycling of post-consumer scrap can provide a valuable source of essential material to the European industry. However, a considerable fraction of collected and processed copper old scrap is exported, while the remaining fraction is either not recovered or lost due to nonfunctional recycling undermining the implementation of a circular economy. In this work, material flow analysis, regression analysis, and life cycle assessment are combined to explore the possible evolution of four scenarios of copper demand in Europe to year 2050 and the potentials for greenhouse gas emissions reduction under material circularity conditions.The results show that for three of the four scenarios, secondary production would not comply with the carbon dioxide emissions reduction target of 50% below 2000 levels neither in case of combined aggressive recycling, moderate decarbonization of electricity, and energy efficiency improvements. In particular, for the scenario that describes a “business as usual” approach, the modelled future domestic demand can only be met by increasing primary inputs and, despite strong efforts to improve recycling at end-of-life, the fraction of old scrap in total metal demand seems likely to achieve 65% at best. Should that scenario ensue, the GHG emissions embodied in EU copper demand might result in an emissions gap of more than 15 TgCO₂eq or about +260% the carbon dioxide reduction target. In contrast, the lowest environmental impacts are associated with a scenario emphasizing green technology and more equitable lifestyles. In that scenario, the secondary copper flows will gradually approach the expected demand, laying the foundation for achieving a circular economy with considerable potential for preserving natural capital and mitigating climate change. This possible future, however, requires dramatic changes in the current pattern of material production and consumption, as we discuss.     

Optimal production resource reallocation for CO2 emissions reduction in manufacturing sectors

To mitigate the effects of climate change, countries worldwide are advancing technologies to reduce greenhouse gas emissions. This paper proposes and measures optimal production resource reallocation using data envelopment analysis. This research attempts to clarify the effect of optimal production resource reallocation on CO₂ emissions reduction, focusing on regional and industrial characteristics. We use finance, energy, and CO₂ emissions data from 13 industrial sectors in 39 countries from 1995 to 2009. The resulting emissions reduction potential is 2.54 Gt-CO₂ in the year 2009, with former communist countries having the largest potential to reduce CO₂ emissions in the manufacturing sectors. In particular, basic material industry including chemical and steel sectors has a lot of potential to reduce CO₂ emissions.     

Adapting to climate change: Public water supply in England and Wales

This paper describes an assessment of the ways in which water supply companies in England and Wales are adapting to climate change, evaluated in the context of a model of the adaptation process. The four components of the model are (i) awareness of and concern about the potential impacts of climate change, (ii) adaptation strategy, (iii) the concept of an adaptation space from which options are selected, and (iv) the notion that three groups of factors influence awareness, strategy and option selection: susceptibility to change, internal characteristics of the organisation, and regulatory and market context.Public water supply in England and Wales is provided by private sector companies, subject to environmental and economic regulation. Hydrological simulations suggest that climate change has the potential to reduce the reliability of supply sources over the next few decades. The industry in December 2004 completed a review of investment requirements over the next five years.Awareness of climate change is high in the water industry, but by developing assessment procedures and incorporating them into the investment review the regulators forced companies to consider explicitly the potential impacts of climate change in a consistent and rigorous manner. These analyses combined climate change with other pressures on water resources, and in practice companies did not attribute specific investment decisions or proposals to climate change or indeed any other individual drivers. The broad strategy adopted by all water supply companies – to maintain standards of service – is determined by regulatory controls and market considerations, but the degree of concern about the impacts of climate change and precise adaptation options necessary to address supply-demand imbalances varied between water supply companies, reflecting local geographic conditions. The water supply companies and regulators have different perspectives on the relative merits of supply-side and demand-side measures, reflecting different organisational priorities.The 2004 investment review determined that no specific actions were necessary to deal with future climate change, but that measures set in place – in terms of methodologies and investment in investigations into specific resource developments – provided a sound foundation for more specific actions in the next investment review in five years time. The paper concludes by summarising the factors assisting and constraining adaptation over the next few decades.     

The EU as a frontrunner on greenhouse gas emissions trading: how did it happen and will the EU succeed?

The objective of this paper is first to provide empirical evidence of what can be seen as a rather remarkable change in EU’s position on the use of greenhouse gas (GHG) emissions trading (ET) in climate policy, from the role of a sceptic in the run-up to Kyoto towards more of a frontrunner. The paper argues that there is a synergistic and multilevel mix of explanatory factors for this “U-turn”, including developments at the international, EU, Member State, sub-national, and even down to the personal level. Second, the paper explores and discusses the philosophy behind the Commission’s proposal for a directive on GHG ET. Third, the paper examines the prospects for ‘success’ of a scheme for EU-wide ET using a multifaceted set of metrics. In brief, we argue that output success—the chances for having a directive adopted—hinges on the resolution of two key issues. First, whether the preliminary phase is to be mandatory or voluntary, and second, incompatibilities with domestic ET schemes. Outcome success—steering and cost-effectiveness—will in turn depend on factors like the coverage of the scheme and inclusion of project-based credits, while more long-term political implications hinges on the successful adoption and operation of the scheme.

“The Proposal on emissions trading represents a major innovation for environmental policy in Europe. We are de facto creating a big new market, and we are determined to use market forces to achieve our climate objectives in the most cost-conscious way […]. The emissions trading system will be an important cornerstone in our strategy to reduce emissions in the most cost-effective way”.

Environment Commissioner Margot Wallström.