The European Union aims at net-zero emissions by 2050. A key sector to achieve this goal is road transport, where emissions show no signs of reducing but continue to grow. A review of policies undertaken by EU member states and the G20 to reduce transport emissions reveals that both present and planned policies focus on binding supply-side measures, but offer only weak demand-side incentives. To address this imbalance, we developed a downstream, demand-side policy prototype through an expert interview design process. We call the prototype “cap-and-surrender” because it caps road emissions, and then allocates tradable emission allowances to individual vehicles that drivers surrender at each fill-up. Allowance pricing, both by the state and in the secondary market, is designed to incentivize decarbonization of the sector. Though the system would require significant investment, its revenue potential to the state should exceed this investment by several multiples. We discuss the potential economic, environmental and social impacts of the policy, as assessed by European transport experts. We find that the approach can deliver significant transport emission reductions in an effective and economically efficient manner. Through the appropriate design of national allocation rules and a gradual phasing in of cap and surrender, potential negative social consequences can be mitigated, and public acceptance of the policy promoted.
With the Climate and Energy Package the European Commission has also published its draft for a revised EU Emissions Trading Scheme from 2013 onwards. The draft revision of the EU ETS serves as the EU's main pillar to fight climate change in that it requires a reduction of mainly CO2 of 21% below 2005 figures for the EU's major emissions sources in the energy and industry sectors. In addition, most notably the EU is proposing an EU wide cap and harmonised allocation rules, in order to exploit the full potential of emissions trading making national allocation plans ghosts of the past. The revised EU ETS gives investors into CDM projects the necessary long time planning security for investments into projects. At the same time it sends out a strong signal to the international negotiations for a post-2012 climate agreement in that it allows the use of more project based generated credits within the EU ETS once an ambitious post 2012 agreement is concluded.
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