Abstract

Abstract
The authors undertake a critical assessment of the intellectual foundations supporting the new European Union (EU) Emissions
Trading Scheme (ETS, or the Scheme), the cornerstone of polices designed to achieve the targets of the Kyoto Agreement of
reducing emissions of greenhouse gases (GHG). Despite its considerable scope, the authors found that officially sponsored research
and academic efforts in support of ETS were surprisingly limited. Importantly, in advance of implementation, a definitive consensus
on both the potential economic impact and the usefulness of the Scheme in reducing the GHG emissions had not been reached.
Reviewing the literature, the authors encountered varying and, at times, conflicting viewpoints, officially and in academic research,
on the potential economic impact of the Scheme. These included attempts to quantify its benefits and costs, raising concern that this
huge and encompassing multi-national policy initiative may have been launched with inadequate intellectual ground-work.
According to the authors consistency between the ETS and other EU policies, such as those relating to energy, should have been a
key concern, but such aspects have received only minimal attention in both official and academic research. The European
Commission has promoted open and competitive markets for gas and power across member states, but the record in achieving such
conditions is relatively poor and the authors argue that, as a result, the environmental objectives of the EU Scheme may not be
thwarted. In addition, continuing disagreement over the Kyoto Agreement itself—especially with regard to its potential costs and
benefits—further frustrates efforts to rigorously justify a policy in support of reducing GHG emissions. The authors argue that,
given the scope of the EU Scheme, the paucity of research evidencing that it is likely to succeed in reducing GHG emissions in the
form of CO2 is surprising and should be of concern to those affected by it along with environmental campaigners, many of whom are
enthusiastic supporters.
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