Emissions Trading Schemes and division of competence between Commission and Member States: Commission v. Poland and Commission v. Estonia

Publishers Abstract:
In 2003, the Member States ambitiously adopted the European Union Emissions Trading Scheme Directive (Directive 2003/87). The premise of the EU Emissions Trading Scheme (EU ETS) has been the cost-effective reduction of greenhouse gas emissions within the European Union. Emission allowances, which represent the right to emit a certain amount of CO2 equivalent, can be traded among polluters, exploiting the difference in their respective marginal abatement (i.e. emission reduction) costs.

Firms that have lower marginal emission reduction costs will choose to lower their emissions and sell their excess allowances, whereas firms with high(er) costs may choose to buy extra allowances rather than reduce their emissions. The fact that regulated parties are free to determine their own emission abatement strategies, at the hand of their respective marginal abatement costs, is expected to lead to cost-effective emission reductions. In order to achieve these reductions, a strong price signal on the ETS market is essential.