ABSTRACT
This chapter examines the performance of the European Union Emissions Trading Scheme (EU ETS) as a financial platform for pricing carbon rights as a tool for governing low carbon transition. It examines the theoretical principles behind the popularity of cap and trade as the pre-eminent tool for carbon governance. It considers the question of whether the EU ETS is actually working, focusing first on its function as a trading platform and next on its role in climate change mitigation and the low carbon transition policy. The Environmental Protection Agency (EPA) has employed emissions trading as a policy tool to achieve emissions reductions since 1992. The European Parliament and Council have both endorsed a principle to reduce greenhouse gas (GHG) emissions in the EU by 8095 per cent below 1990 levels by the year 2050. Continued unilateral action on climate change beyond 2020 could therefore potentially undermine Europe's economy.
