Introduced 10 years ago, the European Union (EU) Emissions Trading Scheme (ETS) looked like a timely, efficient and market-friendly approach to a more sustainable economy, with around 45% of total EU emissions to be covered by the scheme. In practice, however, ETS has not worked quite as well as was hoped.

In part due to the economic crisis and subsequent reduction in emissions, there has been a growing surplus of emissions allowances. The resulting low carbon price has not encouraged investment in green technologies or the energy transition that had been hoped for. A number of policy developments have occurred in order to try and address these shortcomings: back-loading of allowances as a short-term measure; the approval of a Market Stability Reserve (MSR), a system that will automatically take a portion of ETS allowances off the market and place it in a reserve if the surplus exceeds a certain threshold; and the Commission’s legislative proposal to revise the ETS for the period after 2020.

With China moving towards the establishment of their own national ETS and the 21st Conference of the Parties (COP21) on climate change beginning at the end of November, the European Policy Centre (EPC) organised this Policy Dialogue with five experts working across the European political field - industry, civil society, EU institutions and academia – to discuss the advantages and shortcomings of the EU-ETS as well as consider the Commission’s proposals for reform in their European and international context.