At the beginning of 2005 the EU launched Europe-wide emission trading at the company level as a new climate protection instrument. This entails the allocation of a politically specified quota of emission allowances to companies who then trade them. This turns the atmospheric pollutants they discharge into an added factor of production, the cost of which they must take into account in their product planning. The operator of a plant must decide whether it is better off avoiding emissions or purchasing emission permits.
Emissions trading in Germany: Just a start
Many of the present shortcomings in emissions trading could be resolved by ceasing to allocate free-of-charge permits after 2012 and (increasingly) auctioning them instead. Full auctioning avoids all the problems and distortions associated with state quota planning at the micro-level of emitter and plant by obviating such regimentation entirely. The trading system as a whole would be made much more simple and transparent and the urgently needed refocus of energy supply towards carriers with a smaller carbon footprint driven forward faster. But most importantly, auctioning would largely eliminate the influence that lobby groups bring to bear on emissions trading. An absolutely crucial advantage of auctioning carbon permits is that the proceeds would flow into the public exchequer – making windfall profits a thing of the past. The government could deploy the revenue to invest in further climate protection projects.
Only available in German.