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ThesisUniversity of Iceland>Félagsvísindasvið>Meistaraprófsritgerðir>

Please use this identifier to cite or link to this item: http://hdl.handle.net/1946/4186


The allocation of allowances in the European Union Emissions Trading Scheme

January 2010

The European Union Emissions Trading Scheme (EU ETS) is the world’s first large
experiment with an emissions trading system for greenhouse gases and it is likely to
be copied by others if there is to be a global regime for limiting these emissions. After
providing a brief discussion of the origins of the EU ETS and its relation to the Kyoto
Protocol, this paper focuses of allowance allocation – the process of deciding the total
quantity of allowances that Member States may issue and how it proposes to
distribute those allowances among the individual polluters which are subject to the
scheme. Particular attention will be given on its relatively decentralized structure that
gives individual Member States responsibility in determining the total amount of
allowances, distribution model of the same to the polluters, and allowing certain
choices and flexibility. The results and criticism of this approach in the allocation
process, together with the role that European Commission has, will be presented
together with the proposed changes for the period after 2012.
The main objective of the thesis is to shed a light on the necessity to initially build
system so that it will provide scarcity of allowances, which would make realistically
high prices so that individual polluters are faced with the viable choice to invest into
green technologies, rather than buying allowances on the market.


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