The EU as a frontrunner on greenhouse gas emissions trading: how did it happen and will the EU succeed?

The objective of this paper is first to provide empirical evidence of what can be seen as a rather remarkable change in EU's position on the use of greenhouse gas (GHG) emissions trading (ET) in climate policy, from the role of a sceptic in the run-up to Kyoto towards more of a frontrunner. The paper argues that there is a synergistic and multilevel mix of explanatory factors for this "U-turn", including developments at the international, EU, Member State, sub-national, and even down to the personal level. Second, the paper explores and discusses the philosophy behind the Commission's proposal for a directive on GHG ET. Third, the paper examines the prospects for 'success' of a scheme for EU-wide ET using a multifaceted set of metrics. In brief, we argue that <italic>output success</italic>-the chances for having a directive adopted-hinges on the resolution of two key issues. First, whether the preliminary phase is to be mandatory or voluntary, and second, incompatibilities with domestic ET schemes. <italic>Outcome success</italic>-steering and cost-effectiveness-will in turn depend on factors like the coverage of the scheme and inclusion of project-based credits, while more long-term <italic>political implications</italic> hinges on the successful adoption and operation of the scheme. <disp-quote> "The Proposal on emissions trading represents a major innovation for environmental policy in Europe. We are de facto creating a big new market, and we are determined to use market forces to achieve our climate objectives in the most cost-conscious way [...]. The emissions trading system will be an important cornerstone in our strategy to reduce emissions in the most cost-effective way". </disp-quote> Environment Commissioner Margot Wallström.