The Making of the EU Emissions Trading Scheme:: Status, Prospects and Implications for Business

Emissions trading is likely to be a crucial pillar of future climate change policy. Since 2005 the European Union (EU) has implemented a CO2 emissions trading scheme, the first major global scheme of its kind, and potentially an important precursor for other such schemes. This article assesses whether the EU Emissions Trading Scheme has lived up to its promise as a cost-effective tool for reducing greenhouse gas emissions in line with the Kyoto Protocol targets and beyond. It outlines the possible steps to improve the functioning of the EU ETS and identifies the resulting managerial implications.