ABSTRACT

The EU ETS is a grand climate policy experiment – the first-ever international cap-and-trade system to target industry. The ultimate aim is to create a global carbon market by encouraging other major emitters, not least the USA and China, to follow suit. However, the economic recession that developed from 2008 has put the EU ETS to the test. A significant supply-demand imbalance of allowances has accumulated, followed by a low carbon price. This chapter explores possible solutions for the EU, as well as presenting a brief analysis of the evolution and achievements of the system.