The implementation of the European Trading Scheme (EU-ETS) regulatory in 2005 is the consequence of the rising emission of greenhouse-gases (GHG). Currently, Europe emits
about 3.74 billion tonnes pollution per year, which is high but – looking from a global angle nevertheless below the US’ and China’s level of emissions. The reason for the increased pollution is the growth of demand and consequently productivity that has compound over time but needs to be stopped. The EU-ETS is Europe’s instrument to achieve the Global Temperature Target, whose goal is to decrease the overall temperature by two-degrees Celsius and thereby to reduce the negative externalities for the society and in the long run for the world. Furthermore the aim of the EU-ETS is to stop the growth of emissions of greenhouse gases and to declare binding targets for 2020 in order to reduce emissions by 20 per cent compared to the level of 2005 . The implementation of the regulatory has marked a turning point in the European policy because it was the first time that a marketbased approach of tradable permits got implemented in a cross-national way. It is the biggest implementation of a cap-and-trade scheme and the engine of the European climate policy. The German industrial landscape is shaped by small and medium-sized Enterprises (SMEs) 1 that account for approximately 99.7 per cent of all enterprises in Germany. Hence, around half of the German companies who need to participate in the EU-ETS are SMEs. The European Commission stated in their Enterprise and Industry Fact Sheet released in 2013 that “German SMEs continue to be more innovative and internationally orientated than most of their EU partners”. As SMEs are important for German economy and are innovative orientated it is especially important to investigate how they are implementing the above-described EU-ETS. With the help of the linkage between these two key aspects – the innovative SMEs in the German economy and the implementation of the EU-ETS – this thesis investigates how German SMEs implement the EU-ETS in their value chain and in how far they – as a consequence of the EU-ETS regulatory – are developing innovations regarding pollution reducing measures.
Table of Contents
1. Introduction
2. Methodology
3. EU-ETS
3.1 Theoretical background: Implementation and development of the EU-ETS
3.1.1 Phase I
3.1.2 Phase II
3.1.3 Phase III
3.2 Political asymmetry and carbon leakage
4. Status quo of the EU-ETS
5. SMEs in the German economy
5.1 Adaption of the EU-ETS within German SMEs
5.2 Environmental-innovation-activities
5.2.1 Short-term impacts of eco-innovation-activities
5.2.2 Long-term impacts of eco-innovation-activities
6. Porter hypothesis
6.1 Porter hypothesis within the EU-ETS
6.2 Criticism on Porters’ hypothesis
7. Further research
8. Conclusion
Objectives & Research Topics
This thesis examines the integration of the European Emissions Trading Scheme (EU-ETS) within German small and medium-sized enterprises (SMEs) and explores how this regulatory framework influences their environmental innovation activities. It addresses the core question of whether the EU-ETS provides sufficient incentives for SMEs to pursue long-term pollution-reducing innovations, or if it acts as a competitive hurdle.
- Implementation challenges of the EU-ETS in the German SME sector.
- Economic impact of eco-innovation on SMEs’ competitiveness.
- Distinction between short-term efficiency measures and long-term innovation strategies.
- Critique of the Porter hypothesis in the context of European climate policy.
- Analysis of market failures and the impact of low carbon prices on innovation.
Excerpt from the Book
1. Introduction
The implementation of the European Trading Scheme (EU-ETS) regulatory in 2005 is the consequence of the rising emission of greenhouse-gases (GHG). Currently, Europe emits about 3.74 billion tonnes pollution per year, which is high but – looking from a global angle - nevertheless below the US’ and China’s level of emissions. The reason for the increased pollution is the growth of demand and consequently productivity that has compound over time but needs to be stopped. The EU-ETS is Europe’s instrument to achieve the Global Temperature Target, whose goal is to decrease the overall temperature by two-degrees Celsius and thereby to reduce the negative externalities for the society and in the long run for the world.
Furthermore the aim of the EU-ETS is to stop the growth of emissions of greenhouse gases and to declare binding targets for 2020 in order to reduce emissions by 20 per cent compared to the level of 2005 (see Gurria, 2010, p.11). The implementation of the regulatory has marked a turning point in the European policy because it was the first time that a market based approach of tradable permits got implemented in a cross-national way. It is the biggest implementation of a cap-and-trade scheme and the engine of the European climate policy.
Summary of Chapters
1. Introduction: Outlines the rise of greenhouse gas emissions and the role of the EU-ETS as a primary climate policy tool for Europe to reach its 2020 reduction targets.
2. Methodology: Explains the use of existing academic literature, empirical data, and a qualitative case study from the German Chemical Industry to investigate SME behavior.
3. EU-ETS: Details the historical development of the EU-ETS through its three phases, the mechanics of cap-and-trade, and the challenge of political asymmetry.
4. Status quo of the EU-ETS: Assesses the current state of the emissions market, focusing on low price volatility and the limitations of policy measures like backloading.
5. SMEs in the German economy: Investigates the economic significance of German SMEs and how they adapt their innovation processes in response to the EU-ETS.
6. Porter hypothesis: Examines whether environmental regulation can spur innovation and competitive advantages, presenting both the theory and its criticisms in an SME context.
7. Further research: Suggests future directions, including the need for worldwide market integration and structural adjustments to address the allowance surplus.
8. Conclusion: Summarizes findings, concluding that in the present situation, eco-innovation activities in SMEs are hampered by uncertainty rather than incentivized by the EU-ETS.
Keywords
EU-ETS, SMEs, Environmental-innovation, Eco-innovation, Greenhouse gases, Cap-and-trade, Porter hypothesis, Carbon leakage, Emission allowances, Sustainable manufacturing, Marginal abatement costs, Competitive advantage, Germany, Climate policy, Green technology
Frequently Asked Questions
What is the primary focus of this thesis?
The thesis investigates how German SMEs implement the EU-ETS regulatory framework and to what extent this influences their development of environmentally related innovations.
What are the core thematic areas discussed?
The work covers the history and mechanics of the EU-ETS, the economic importance of the German "Mittelstand," the short-term vs. long-term impacts of eco-innovation, and the applicability of the Porter hypothesis to current environmental regulations.
What is the primary research question?
The central questions are: do eco-innovation activities in SMEs benefit from the EU-ETS, and does the EU-ETS have an impact on the long-term effects of eco-innovations within these enterprises?
Which scientific methods are employed?
The study relies on a synthesis of existing academic literature, analysis of empirical data (such as the CO2-Barometer), and insights from a qualitative case study of the German Chemical Industry.
What is covered in the main section of the book?
The main section outlines the evolution of the EU-ETS from Phase I to Phase III, details the specific challenges SMEs face with regulatory compliance, and critically examines the Porter hypothesis's validity regarding innovation offsets.
What characterises the key concepts used in the study?
Key concepts include "carbon leakage," "marginal abatement costs," "grandfathering," and "first-mover advantage," all of which are analyzed in the context of the German industrial landscape.
How does the current EUA price affect SME investment decisions?
The thesis argues that the currently low and unstable EUA price creates uncertainty, which inhibits long-term investments in green technology rather than providing the intended incentive.
Does the Porter hypothesis hold true for German SMEs under the EU-ETS?
The research concludes that the hypothesis is difficult to apply, as SMEs face significant implementation burdens and the regulation often acts more as a competitive obstacle than a catalyst for innovation.
- Citar trabajo
- Jes Hennig (Autor), 2014, The Implementation of the European Trading Scheme (EU-ETS) in German SMEs and its Implication on Environmental-Innovation-Activities, Múnich, GRIN Verlag, https://www.grin.com/document/295506
