TH`ESE Docteur de l'Université Paris-Dauphine Morgan HERVÉ ...

The EU ETS is a cap-and-trade policy. A cap-and-trade scheme gives the
incentive to reduce emissions beyond the cap since compliance-buyers are
allowed to sell emissions rights in excess of their emissions needs to those
for whom it is more expensive to reduce their emissions on their own. The
asset traded is the European Union Allowance (EUA) which gives the right
for its EU ETS holder to emit one ton of CO2 in the atmosphere. To claim
compliance, EU ETS installations must surrender as many EUAs as tons
of CO2 they have emitted over a given year. They can do so by either acquiring
more EUAs (or similar assets) or by reducing their emissions. The
need for trading happens because of the pre-established scarcity of emissions
rights over a given period of time - the cap suggested by European member
states and accepted by the EC. The allocation of allowances in the EU ETS
among the trading sectors recognizes different sectoral abatement options
and related costs as well as impacts on competitiveness.
At the time of writing, there were three compliance periods in the EU ETS:
the trial phase (phase I) between 2005 and 2007, the Kyoto phase (phase
II) between 2008 and 2012 and the post-Kyoto phase (phase III) between
2013 and 2020. The trial-and-error policy process brought many changes
and adjustments to the policy over these three phases.
1.1.2 EU ETS Phase I: a trial phase
The modus operandi common to phase I and II of the EU ETS is the following.
EU member states identify the installations falling within the scope of
the directive: stationary sources of carbon dioxide (CO2) emissions with a
capacity above 20 MW. EU member states then enter in consultation with
the owners of the regulated installations to obtain historical emissions data
or attempt to do so based on various estimation approaches. Each member
state applies its effort share of the burden sharing agreement to its national
emissions cap and distributes this burden among the installations. As a result,
an emissions cap, corresponding to the maximum quantity of CO2 an
installation can emit during a given period, is set. The next step involves
drafting a document called a national allocation plan (NAP in short). This
document summarises elements from the whole process and ultimately outlines
the overall national emissions cap and each installation’s emissions cap
over an entire market phase. The NAP is then communicated to the EC.
The EC reviews the submission to ensure that (1) the member state is on
the right track to meet its emissions reduction objective and (2) that ultimately
the EU is expected to claim compliance towards Kyoto.
Stationary sources falling within the scope of the Directive are combustion
installations with an installed capacity superior to 20 MW. Some 70% of
those installations are either producing power or heat and it was estimated
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