Towards an International Emissions Trading Scheme : Legal Specification of Tradeable Emissions Entitlements

The Paris Agreement reaffirmed the role of emissions trading as an important policy tool for mitigating climate change. Equally, emissions trading schemes (ETSs) are increasingly being developed and interlinked. Despite these developments, no agreement has been reached regarding the legal character of what is being traded. Generally, ETSs involve tradeable statutory entitlements that take the form of emission allowances or carbon credits. Legal uncertainty surrounds whether emission entitlements are capable of constituting property; and, if so, what rights, corresponding duties and liabilities they confer on holders. In this article, the authors argue that the legal character of emissions entitlements can influence the functioning of emissions markets, which has ramifications for achieving the environmental goals of ETSs. The authors identify the methods that legislatures could adopt to characterise emission entitlements, and evaluate limitations of the current approaches. To conclude, the authors explore how top-down, international standards could harmonise and clarify the legal nature of emission entitlements