Linking the EU Emissions Trading Scheme to JI, CDM and Post-2012 International Offsets - A Legal Analysis and Critique of the EU ETS and the Proposals for its Third Trading Period

The so-called 'Linking'-Directive adopted in 2004 does not impose any limit on the import of JI and CDM credits under the European Union Emissions Trading Scheme (EU ETS), but requires from the Member States to set, in accordance with their 'supplementarity' obligations under the Marrakesh Accords, the maximal amount of Kyoto 'units' each covered installation is entitled to use for compliance under the scheme. Fearing a second price collapse of the European Union Allowance, the Commission decided, however, in 2006 to impose strict limits on the use of JI and CDM credits during the second trading period. This paper examines the legal basis of the Commission's decision and explores further the international and European legal framework within which the current debate on the use of JI and CDM credits and post-2012 international offsets takes place. It analyses in particular the recent proposal of the Commission on the third trading period of the EU ETS and the related report of rapporteur Doyle of the European Parliament and discusses the necessity to introduce quantitative and qualitative restrictions on the use of international offsets within the EU ETS against the backdrop of the international negotiations on a new global deal on climate change