The transformative potential of emissions trading

Abstract

Limiting global warming below 2°C or even 1.5°C requires a fundamental transformation of global socio-economic systems. This need for transformation has been taken up by international climate policy. This article synthesis criteria of transformational change from transformation research and climate finance agencies. On this basis, the article conducts a multi-criteria evaluation of the transformative potential of the EU ETS, the world's currently largest market-based climate policy. From this case it can be inferred that emission trading can 'destabilise' incumbent highemission practices but their effectiveness in fostering innovation is limited. Furthermore, the analysis shows that details in the arrangements of the scheme such as allocation rules can have a strong detrimental impact on its outcome. If a global carbon market with a uniform price was introduced, this could lead to developing countries "buying in" with large amounts of freely allocated allowances. This, however, has been shown to thwart transformational effects and instead contribute to further carbon lock-in.

Conditions of the Green Transformation. The Case of the European Union

“…Some authors (see Borel-Saladin & Turok, 2013;Georgeson et al, 2017) claim that this term should be associ-ated primarily with environmental change, for example, as "the process of structural change which brings the economy within the planetary boundaries" or as "a system (of decisions, policies, and directions of development) that emphasises the use of renewable energy sources and economical management of green dimensions for a sustainable future". In contrast to definitions that focus on the need to comply with environmental restrictions, other authors (see: Hermwille et al, 2015;Barbier, 2020) closely link "regreening" to multiple dimensions of sustainability -environmental, economic, social and institutional-political. By prefixing the term "transformation" with the word "green", our intention is to focus on environmental dimensions of the changes; however, these almost inevitably give rise to questions concerning social issues and environmental justice (see : Schmitz, 2015;Crespi et al, 2016;Keeys & Huemann, 2017;Cui & Lui, 2021).…”

Additionality revisited: guarding the integrity of market mechanisms under the Paris Agreement

“…Similarly, emission trading systems often do not have very stringent caps, which corresponds with a relatively low price level. Almost all current ETS have been overallocated (Hanoteau, 2014;Hermwille, Obergassel, & Arens, 2015;Narassimhan, Gallagher, Koester, & Rivera Alejo, 2018).…”

Out of the Comfort Zone! Governing the Exnovation of Unsustainable Technologies and Practices

“…Such approaches can speed up the economically-driven process of creative destruction. In practice, however, implementing these instruments in an ecologically ambitious way proves to be an extremely difficult political task (Gawel et al 2014, Hermwille et al 2016.…”

“…Together the two agendas provide a legal framework and a strong normative call to finally start governing the transformation to lowcarbon and resource-light societies and do so in a just way (Hermwille 2016(Hermwille a, 2017.…”