The EU Emissions Trading Scheme

A New Domain for Policy Network Analysis

Term Paper (Advanced seminar), 2012

20 Pages, Grade: 1,0


Table of contents

1. Introduction

2. European Environmental Policy – Origins and Dynamics
A New Impetus for Environmental Policy – the EU ETS

3. In Theory – Policy Networks and Multi-level Governance
3.1 Multi-level Governance – an Appropriate Analytical Tool?
3.2 A Typology for Policy Network Analysis

4. In Practice – Which Actors are Involved?
4.1 Governmental Actors 11
4.1.1 The European Commission
4.1.2 The Council of Ministers
4.1.3 The European Parliament
4.1.4 Interim Conclusion
4.2 Non-state Actors
4.2.1 Non-governmental Organizations
4.2.2 Business Associations

5. Conclusion

6. References

1. Introduction

Due to ever mounting scientific evidence, today neither climate sceptics nor climate believers[1] deny the fact that climate change is occurring and that human activity can be regarded as a prime cause. Uncertainty solely remains about the precise relationship between specific concentrations of particular greenhouse gases – most importantly water vapour and carbon dioxide – and changes in global temperatures. It is beyond doubt that certain gases in the atmosphere contribute to the so-called ‘greenhouse effect’ by trapping heat. Human activity like burning carbon-based fuels, but also deforestation and ploughing is intensifying this effect and causing a constant rise in carbon dioxide concentrations (cf. Pearce 2010:235).

The growing empirical evidence for climate change triggered a global response, even though some authors classify it as ‘meagre’ (cf. Helm 2008:212). In 1992, 154 countries joined the United Nations Framework Convention on Climate Change (UN FCCC), to cooperatively consider what they could do in order to limit average global temperature increases and the resulting climate change. The UN FCCC built upon the Intergovernmental Panel on Climate Change (IPCC) established in 1988, an international scientific collaboration entrusted with the task to ‘provide the world with a clear scientific view on the current state of knowledge in climate change and its potential environmental and socio-economic impacts’ (IPPC n.d.). The UN FCCC finally kicked off the process which culminated in the Kyoto Protocol, adopted in Japan on 11 December 1997 and entering into force on 16 February 2005. The Protocol commits 37 industrialized countries and the European Union (EU) to stabilize their greenhouse gas emissions and sets binding emission reduction targets for a certain period (cf. UN FCCC n.d.). Being of particular relevance for this paper, the Kyoto agreement enabled the European Union Emissions Trading Scheme (EU ETS) to get under way as a prototype for a global emissions-trading regime.

The aim of this paper is to have a closer look at the EU ETS and to examine whether the development of the regime can be explained by using the lens of policy network analysis – a concept that appears particularly well suited to grasp the essence of multi-level governance in the European Union (cf. Jachtenfuchs 2001:255). The central question is whether the actors involved in the development of the EU ETS can be identified and classified by using policy network analysis as a theoretical framework.

In the following, there will first be a brief summary of the evolution of environmental policy in the EU and the development of the EU ETS until its extension to the post-Kyoto trading period (2013-2020). The next section will outline the main assumptions of policy network analysis and its rootedness in the broader framework of transnational governance in order to show why it is an appropriate analytical tool for theorizing about the European Union. Succeeding to that a typology will be developed in order to assess the influence of policy networks on European environmental policy and the EU ETS in particular. The main part of the paper will then focus on the classification of selected actors involved in the development of the EU ETS according to the previously developed typology in order to answer the question whether the creation of the EU ETS can be explained by using the lens of policy network analysis.

2. European Environmental Policy – Origins and Dynamics

The evolution of environmental policy at the European level has been characterized by a steady deepening in institutional terms and a significant expansion of environmental issues covered by EU decisions and regulations (cf. Lenschow 2010:308). Already in the 1970s, the topic reached the Community agenda – although following primarily trade-related motivations and without a legal basis on its own. This changed with the ratification of the Single European Act in 1987, providing an explicit legal basis for environmental regulation and laying down the objectives, principles and decision-making procedures (cf. Lenschow 2010:309). The most prominent phase for environmental policy began with the Maastricht Treaty coming into force in 1993 which further consolidated the legal and institutional basis for environmental policy-making.[2] Yet, during the 1990s the dynamic expansion of environmental policy slowed and attention shifted to reform the European regulatory agenda in this field (cf. Lenschow 2010:310). The fifth Environmental Action Program (EAP) published by the Commission in 1993 took up this issue and announced a ‘new governance’ approach to environmental policy – a topic to be examined in detail in the following chapter.

A New Impetus for Environmental Policy – the EU ETS

Even though attention for environmental policy at the European level partially declined after the Maastricht and Amsterdam Treaty reforms, the emerging debate on climate change revived the issue and caused the EU to take up a leading position in global environmental negotiations.

Already at the Rio Summit[3] in 1992, the EU had advocated a quantitative restriction on greenhouse gas emissions as well as binding reduction targets. The Kyoto Protocol eventually provided a contractual framework for the Union’s proposals by setting a quantitative target (8% reduction from 1990 emissions for EU 15 during the first commitment period from 2008 to 2012), a flexible mechanism including emissions trading for achieving these targets and the impetus for the legally binding ‘burden sharing agreement’ that sets individual emission targets for each Member State (cf. Convery 2009:393). On October 13, 2003 the first ETS directive[4] came into effect, with trading to commence January 1, 2005. By this means, the ETS became the EU’s key tool for reducing industrial greenhouse gas emissions cost-effectively by working on the ‘cap and trade’ principle: the cap constitutes a limit on the total amount of certain greenhouse gases that can be emitted by the installations in the system. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. If a company has not surrendered enough allowances to cover all its emissions by the end of the year, heavy fines are imposed. On the other hand, if a company has succeeded in reducing its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances (cf. EU ETS, n.d.). The number of allowances is reduced over time so that total emissions fall. In March 2007, the European Council declared its intention to strengthen the European Climate Policy beyond the Kyoto Protocol commitment and to cut unilaterally the European emissions by 20% below 2005 in 2020. A Commission’s proposal published and adopted in 2008 extends the EU ETS to a post-Kyoto trading period (2013-2020) and reforms the ETS institutional framework in order to improve its functioning and effectiveness in reducing CO² emissions (cf. Clò 2009:6).

Due to the fact that this paper focuses on an analysis of the actors involved in the initial establishment of the ETS, the later reforming procedures are neglected while the main theoretical assumptions of the multi-level governance approach and its operationalization within policy networks will be outlined in the following.

3. In Theory – Policy Networks and Multi-level Governance

‘To try to describe how the EU works without the metaphor of a network is a challenge on par with seeking to explain, under the same injunction, how international terrorists operate’ (Biersteker 2002, as quoted in Peterson 2009:108).

Even though Biersteker’s choice of words is quite extreme, his statement goes to the heart of the matter. The EU has to be defined as a sui generis entity (cf. Chalmers et al. 2010:52) located between former models of purely intergovernmental organizations and a fully independent supranational authority with decision-making competence and legitimacy in its own right. Accordingly, Peterson (2009:105) describes the Union as ‘some kind of hybrid arrangement involving a range of different actors who are linked together in political, social, or economic life’. This portrait of the EU as a multilevel system with actors representing different levels of government provides an important rationale for analysing its policy-making processes through the lens of a governance approach.

3.1 Multi-level Governance – an Appropriate Analytical Tool?

Over the past decade, scientific research on the EU’s capacity as a decision-making system has shifted from a rather state-centric view[5] according to which the EU acts solely as executive agent for the national sovereigns to a perspective that characterizes the Union in terms of multi-level governance. The reasons for this development can be traced back to the 1970s, when Keohane and Nye first mentioned the growing significance of cross-border transactions between transnational actors such as companies, societal organizations, financiers and foundations that added ‘a new dimension of international politics beyond the nation-state and intergovernmental politics’ (Keohane & Nye 1971, as quoted in Andonova et al. 2009:54). With the increasing intensity of globalization in the 1990s, the governance concept grew in popularity – causing Jachtenfuchs (2001:254) to conclude that governance is now ‘a political ideology, a kind of micro-constitutionalism in which different players contribute, in view of their competencies, to the policy process’.


[1] The expression ‘climate sceptic‘ refers to a scientist who denies anthropogenically-induced climate change or its severity, while ‘climate believers’ assume that global warming is happening and that it is caused by anthropogenic emissions and could be catastrophic if not being addressed (Hamenstädt 2012).

[2] In the Maastricht and Amsterdam treaty reforms qualified majority voting (QMV) in the Council was extended to most areas of environmental policy and the European Parliament gained co-decision powers. Furthermore, the treaties made sustainable development one of the EU’s central objectives (Article 2 Treaty on the European Union, TEU).

[3] United Nations Conference on Environment and Development (UNCED), a major UN conference held in Rio de Janeiro from 3 June to 14 June, 1992.

[4] Directive 2003/83/EC of the European Parliament and the Council of 13 October 2003 establishing a scheme for greenhouse gas emissions trading within the Community and amending Council Directive 96/61/EC.

[5] This view is embedded in the broader framework of ‘liberal intergovernmentalism‘, an integration theory developed by Andrew Moravcsik in the 1990s.

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The EU Emissions Trading Scheme
A New Domain for Policy Network Analysis
University of Münster  (Institut für Politikwissenschaft)
European Environmental Politics
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ISBN (eBook)
ISBN (Book)
File size
591 KB
EU Emissions Trading Scheme, Kyoto Protocol, Policy Network Analysis
Quote paper
Katja Philipps (Author), 2012, The EU Emissions Trading Scheme, Munich, GRIN Verlag,


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