Dóra Fazekas Carbon Market Implications for new EU - UniCredit ...

1. An Overview of Hungary-Specific Features
Like other new Member States of the European Union, Hungary is a “country that is undergoing the
process of transition to a market economy,” according to the UNFCCC, and shares most
characteristics of its neighboring states with respect to climate policy (Bart, 2007). Hungary signed
the UNFCCC on June 13, 1992; Parliament then passed the appropriate resolution and Law
LXXXII of 1995 eventually announced the ratification to the public. The Government of Hungary
made the decision to sign the Kyoto Protocol on March 27, 2002; this was announced by
Parliamentary Decree no. 49/2002, VII 19.
Szlávik et al. (2000) maintain that Hungary is always in line with European policies, and that it
would not introduce environmental legislation, which diverges substantially from that in place in
neighboring countries. It is especially interesting and worthwhile to look at Hungary in the context
of emissions trading. As an economy in transition, Hungary has barely twenty years of experience
with a market-based economy: it was thus rather challenging for the country to introduce – and
introduce successfully – this kind of market-based environmental policy tool (including emission
trading). Not only was, for instance, the government’s staff working with climate issues initially
just a team of two people (prior to the introduction of the scheme), but the infrastructure and the
institutions to back such a system were lacking as well. Nonetheless, following the pilot phase of
the EU ETS, a Climate Change and Energy Unit is now operating within the framework of the
Ministry of Environment and Water in Hungary, with a staff of five people. The issue of climate
change, and the term cap-and-trade itself, is becoming known to an ever-wider audience.
Environmental awareness in Hungary has grown considerably in recent years.
1.1. Hungarian Greenhouse Gas Emissions
In terms of climate protection, Hungary finds itself – just like other countries of the region – in a
paradoxical situation. Its current emission of greenhouse gases is much lower than it was prior to
the 1990s, the period that serves as the point of reference for international climate protection
activities. In the case of Hungary specifically, the country is obligated to reduce its emissions levels
by 6% compared to the years 1985-1987. Hungary’s emissions level during those years, however,
was so high (98,536 thousand tonnnes of CO2e) that the amount it may currently emit is actually
significantly higher than the country’s emissions today. In 1997, the year of the Kyoto Conference,
Hungary’s emissions totaled 72,649 thousand tonnnes, which means the country’s obligations
actually allow for an increase of 27.5%.
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