member-states and the Commission further handledthis issue is of substantial importance for the climate policy success of the ETS, andthe possibility of seeing allowance prices rising to levels stable and high enough tospur substantial further abatement efforts in the EU. Somewhat paradoxically, theCDM factor may increase the willingness of governments to take on ambitious ETStargets, but in the implementation phase mean less abatement in the EU area. Hence,increased global (cost) effectiveness may go hand in hand with less reductions withinthe EU. This can be seen most clearly in the case of Germany, whose acceptance ofthe Commission’s more stringent NAP II cap was accompanied (and domestically‘sweetened’) by an increased planned use of CDM.In conclusion, the link between the EU ETS and the climate regime’s ﬂexiblemechanisms is insigniﬁcant in terms of explaining the level of ambition in NAP I.However, this factor has played and will play a more signiﬁcant role in NAP II.ConclusionHow can we explain similarities and differences in the implementation of the EU ETSthus far? Our ﬁrst proposition took a decentralized EU ETS as its point of departureand held that it would lead to low but varying levels of environmental ambition. Wecan see that this proposition has received signiﬁcant empirical support. In line withthe expectations displayed in Chapter 2, the member-states over-allocated the totalnumber of allowances, and National Allocation Plans were delayed. Moreover, the
47 European Commission (29 November 2006), IP/06/1650, Emissons Trading:Commission Decides on First Set of National Allocation Plans for the 2008–2012 TradingPeriod (Brussels), 3.48 WWF (November 2006), ’Use of CDM/JI Project Credits by Participants in Phase IIof the EU Emissions Trading Scheme – A WWF Summary of the ECOFYS UK Report’ (UK:WWF).49 Ecofys (27 November 2006), ’Market Risks becoming Long’, Press release.
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differences in implementation appeared more striking than the similarities, indicatingthe importance of domestic-level explanations.We singled out four key EU emitters – the UK, Germany, Spain and Poland– for more in-depth analysis. These countries varied in terms of implementationambitiousness and they represented different geographical EU areas. Varyingimplementation could be explained by differences in institutional ﬁt, differing needsfor ambitious EU ETS implementation to achieve relevant EU or Kyoto targets, aswell as climate policy ‘drive’. However, our analysis also showed the signiﬁcance ofadministrative capacity, especially in the case of Poland as well as the new Centraland East European member-states. These countries had generally targets under theKyoto Protocol which were generous, due to ‘Berlin Wall fall’ effects. Furthermore,they were also anxious to not let the EU ETS constrain their future economicgrowth.Our second proposition took a centralized EU ETS as its point of departure andsuggested that it would lead to generally high(er) levels of environmental ambitiondue to common EU criteria. The EU ETS was basically decentralized, and this led toa ‘race to the bottom’ dynamic among the member-states, since they had incentivesto protect their own industries. This process was fuelled by short deadlines anduncertainty about the actions of others. However, the centralized line of thinkingcan contribute to our understanding of the implementation of the EU ETS, as the EUETS includes elements of harmonization. The criteria for harmonizing the NationalAllocation Plans and the ‘watchdog’ role of the European Commission clearly pulledin the direction of less allowances and scarcity in the market. The Commission hasrather quietly and almost unnoticed increased harmonization considerably in theNAP II process.Our ﬁnal proposition was concerned with factors at the international level. Itheld that low exposure to international competition and strong links between the EUETS and CDM would pull in the direction of relatively high ambition levels. Thisproposition gained least support in our analysis, but international competition andinﬂow of allowances from CDM projects will probably become increasingly relevantin the future. First, it is true that industry opposition in general can shed light on theproblems of achieving ambitious allocation and scarcity in the market. Industry inthe UK, Germany, Spain and Poland lobbied to maximize their allocations underthe EU ETS. However, the relevant sectors are not signiﬁcantly exposed to globalcompetition. Still, possibly much higher future allowance prices and the inclusion ofthe globally exposed aluminium sector in the ETS may act to increase the importanceof this factor.Second, CDM credits were not used for compliance purposes in the ETS pilotphase, even though the EU countries were formally allowed to do so from 2005. Thereason was partly lack of incentives for using such credits in the over-supplied pilotphase, partly lack of capacity of the CDM’s Executive Board to assess and approveprojects, and in addition the lack of a formal link, as the global allowance registryhas not yet started functioning. The issue of linking is, however, signiﬁcantly morerelevant in the NAP II process. The Commission has tried, with some success, torestrict the use of CDM credits in order to promote more abatement within the EU
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area – at the risk of lowering the willingness of governments to take on ambitiousETS targets.What about the prospects ahead? As noted earlier, although the NAP II processbegan with alarmingly low ambitiousness, the Commission has since succeeded intoughening up almost all NAPs so far assessed; roughly two-thirds of the EU NAPs.Allowances for the EU ETS’s second phase are currently trading for around €18,so it is clear that the market has some conﬁdence that the EU countries and theCommission will be able to deliver. However, analysts are far from certain that thenecessary scarcity and related high and stable allowance price will come about. Notleast the uncertainty related to the JI/CDM inﬂow into the market indicates that itmay very well be the consulting and analyst part of the ET market that may look tothe future with greatest conﬁdence.
Chapter 7
ConclusionsThe EU was initially sceptical to the inclusion of emissions trading in the KyotoProtocol. How then can we understand and explain the subsequent initiation,decision-making and implementation of the EU Emissions Trading Scheme (ETS)?Why did the EU change its position on emissions trading? How did it manage toestablish the world’s ﬁrst international emissions trading system so rapidly? Andwhat are the results so far? These questions are interesting from both an empirical andtheoretical point of view. Empirically, the EU ETS constitutes the ﬁrst internationalemissions trading system in the world and the single most important climate policyinstrument of the EU. How the scheme functions will thus have consequences forthe EU’s compliance with Kyoto targets and how the international climate regimewill develop in the future.In terms of theory, the EU ETS is an interesting case, as differing approachesand perspectives provide us with differing answers as to why and how the EUETS developed. Intergovernmentalists will place main emphasis on the nationstate level, and explain the development of the EU ETS as a result of interstatebargaining. According to this approach, the EU member-states took the initiativeand shaped the ET system in line with their interests and preferences. By contrast,scholars who hold that multi-level governance is the best lens for understanding EUpolicy will focus mainly on the EU level, but also point to the complexity of actorsand institutions involved at various decision-making levels – non-state actors notleast – when explaining what happened and why. According to this approach, theEU Commission took the initiative to the EU ETS, and the Commission and theEuropean Parliament shaped the system, with input from non-state actors at EU level.Intergovernmentalist and multi-level governance approaches emphasize EU-internalfactors and actors as the most important for explaining EU policy making. From theperspective of international regime analysis, however, the EU ETS may simply bea product of the international climate regime. According to this approach, whichplaces main emphasis on the international level, the EU ETS initiative was taken asa response to the Kyoto Protocol, reﬂecting developments within the internationalclimate regime and the international ﬂexible mechanisms.Stated in their extreme form, these approaches appear more competing than theyactually are. They are in fact complementary, but highlight different decision-makinglevels, institutions, actors and mechanisms behind the development of the EU ETS.One central assumption of this book has been that the relative explanatory power ofthe various explanatory perspectives varies in the different policy phases. Anothercentral assumption is that what happens in the initiation and decision-making phaseswill have important consequences for implementation – how the system will workin practice.
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In the following, we ﬁrst sum up the empirical ﬁndings from each chapter, beforediscussing the analytical implications. Finally, we include some reﬂections on thefurther review and development of the system.Empirical FindingsChapter 3 analysed collective and individual outcomes, from the conception of theemissions trading idea until implementation of the system began. The ﬁrst policyinitiation phase ran from the 1997 Kyoto Protocol until 2001, when the Commissionstarted to prepare the ET directive proposal. In this period, the Commission developedthe EU ETS idea in two Communications and a Green Paper. The idea, launched ina June 1998 Communication, was taken a signiﬁcant step further in the 2000 GreenPaper. Here the Commission suggested a cap-and-trade system; narrow coverage interms of gases and sectors, with a focus on electricity and heat, but also includingsuch sectors as iron and steel, reﬁning and chemicals; ﬂexibility in participation(opt-in/opt-out); allocation by auctioning; strict penalties for non-compliance; anda basically centralized and harmonized approach to setting the allowance caps thatwould better secure a central control over the environmental ambitiousness of thesystem.The next decision-making phase extended from the work on the proposal foran emissions trading directive in 2001 to the adoption of this directive in 2003 andthe Linking Directive in 2004. The most signiﬁcant changes from the Green Paperwere undertaken in 2001, when the Commission developed the directive proposal.First, the system was put forward as more decentralized. Member-states were givensigniﬁcant autonomy in drawing up national allocation plans (NAPs) that woulddetermine the cap and the environmental ambitiousness of the system. Second,it was proposed that allocation should be for free in the pilot phase from 2005 to2007. Third, the system was to be mandatory for all member-states, with no explicitloopholes enabling exemption or the addition of installations or sectors. Fourth, therelationship between the EU system and the Kyoto Protocol’s ﬂexible mechanismswas now explicitly acknowledged, and it was suggested to specify this relationship ina subsequent, speciﬁc linking directive. Finally, the chemicals sector was eliminatedfrom the proposed system.The basic structure of the emissions trading directive proposal remained intactthrough the EU decision-making process, where, as prescribed by the co-decisionprocedure, the European Parliament and the member-states played the main formalrole. The changes made in the ﬁnal directive included speciﬁcation of NAP criteria,an opening for some auctioning, limited possibilities for opt-in and opt-out, andpossibilities for pooling of installations. With regard to the Linking Directive, theinitial Commission proposal put forward in mid-2003 suggested speciﬁc, quantiﬁedrestrictions on the use of CDM and JI and no linking before 2008. The ﬁnal directivechanged the Commission proposal in the direction of more lenient restrictions on theuse of CDM and JI, including no quantitative restriction or cap on the import of suchcredits. This could reduce compliance costs, but it might also lessen the pressure onEU governments to take real action in their own countries.
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The ﬁrst implementation phase covered here ran from the adoption of theemissions trading directive in 2003 until early 2007. This includes the pilot phaseallocations and implementation (NAP I, 2005–7), but also the main part of theallocation process for the Kyoto commitment phase (NAP II, 2008–12). We basedour assessment on overall goal attainment: the ability of the EU ETS to promotereductions of greenhouse gas emissions. As this goal is of a fairly long-term character,in order to assess the more short-term progress, two main criteria were applied asproxies: timeliness and, particularly, the ambitiousness of the national allocationplans. Ambitiousness is the central concern, as it represents the intermediate key toactual reduction of greenhouse gas emissions. If the EU ETS is to have any effect onemissions, there must be fewer allowances than there would have been emissions inthe absence of the system. On this point, however, it should be born in mind that onlyshort time has passed, and measuring ambitiousness is quite difﬁcult.Against this backdrop, we ﬁrst concluded that, on the whole, the system has beenmoderately successful so far. Implementation has been marked by signiﬁcant delaysand relatively low ambitiousness – which looks set to change somewhat in NAPII. We also observed signiﬁcant variation in implementation performance. Afterexamining the cases of four key emitters from different regions within the EU, weconcluded that the UK has been the leader and Poland the laggard. Germany andSpain are in the middle, but Spain stands out as an example of signiﬁcant changetowards better implementation.Chapter 4 aimed at explaining the observations in the initiation phase. Why andhow did the idea of the EU ETS develop within the EU? The ﬁrst proposition wasbased on the international regime approach, and held that the initiation of the EU ETSwas a result of pressure, opportunities and learning induced by the Kyoto Protocol.Based on a speciﬁc set of criteria representing expectations that would be in line withthis proposition, our empirical analysis showed that this proposition gained strongsupport. Emissions trading was not part of the EU’s negotiating position in Kyoto,but it nevertheless became part of the Kyoto Protocol, together with an obligationfor the EU to reduce emissions by 8 per cent from 1990 between 2008 and 2012, andfor all to show ‘demonstrable progress by 2005’.The European Commission launched the idea of emissions trading as an explicitresponse to the Kyoto Protocol. This strongly indicates that the European Commissionprepared for implementing emissions trading by 2005 due to general pressureinduced by the provisions included in the Kyoto Protocol. The Kyoto Protocolalso provided economic opportunities: the EU had economic incentives to developthe EU ETS to reduce compliance costs with the Kyoto target. Finally, the KyotoProtocol facilitated learning by linking the active US promotion of emissions tradingto the EU Kyoto commitments, and through detailed international negotiations oninternational emissions trading. This effect became particularly important when theUSA withdrew from the Kyoto Protocol in spring 2001. The EU ETS thus becamean instrument for implementing the Kyoto Protocol commitments, even though theProtocol did not require emissions trading and was at the time not legally binding.On the other hand, the EU did expect the Protocol to enter into force.According to the second proposition, it was the European Commission thatchanged its previously sceptical position on emissions trading and initiated the EU
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ETS, independently of the member-states. Also this proposition gained signiﬁcantempirical support. Shortly after the Kyoto Protocol, DG Environment changed bothpersonnel and position on climate policy instruments. Those who had favouredcommand-and-control were replaced by economists who preferred economic policyinstruments. A ‘Bureaucrats for Emissions Trading’ (BEST) group was formed.This change was facilitated by the need for new climate policy instruments likeemissions trading, when it became clear that adoption of the proposed directive onthe carbon/energy tax would be impossible due to the requirement of unanimity. TheCommission also built up independent knowledge on emissions trading and craftedsupport by internal stakeholders. Emissions trading was a new policy instrument,and the Commission initiated a comprehensive study programme based on externalexpertise to prepare for the EU ETS. In addition, the Commission launched variousconsultation processes that also served as a tool for the Commission to build upknowledge, capacity and not least support among stakeholders.The Commission’s initiation of the EU ETS was facilitated by support of (or atleast absence of direct opposition from) non-state actors in general and target groupsin particular. Major industry federations such as UNICE and EURELECTRIC, thelatter representing the power producers and the major target group under the EUETS, were cautiously positive. Moreover, the Commission could count on supportfrom the oil major BP, which developed its own internal emissions trading system,followed by Shell. During the Kyoto Protocol negotiations ENGOs had opposedemissions trading, but major organizations like the CNE later softened its opposition.Different aspects of emissions trading were framed by the Commissions as attractiveto different stakeholders for different reasons. For industry, the instrument waspresented as a cost-effective tool which could even provide economic opportunitiesfor shrinking emitters. Emissions trading would provide companies with a tradableasset, whereas taxes extract revenues from companies. For ENGOs, the instrumentwould be environmentally effective, given an ambitious cap and adequate design.Combined, this would provide governments with a cost-effective and environmentallyeffective policy instrument. Emissions trading thus emerged as a magic formula foreconomic development and climate protection.According to our last proposition, a change in the positions of member-states waswhat led to the initiation of the EU ETS; the Commission acted on a request frommember-states and anticipated broad-based support. This proposition did not gainmuch empirical support. Only a few countries (the UK, Denmark, the Netherlands,Sweden and Ireland) initially supported the idea of emissions trading within the EU.The UK had a formal opportunity to take the initiative to the EU ETS, as it occupiedthe EU Presidency in the spring of 1998. However, the UK initially focused ondeveloping a domestic emissions trading system – not a European one. Moreover,the Commission could not anticipate broad-based support for the emerging EUETS. National responses to the 2000 Green Paper indicated that votes for andagainst/indifferent to emissions trading were roughly equal – and among those thatwere positive, positions varied widely on harmonization and design. Furthermore,emissions trading was not directly requested by the Council of Ministers, which didnot seriously discuss the matter until 2000. However, the Council of Ministers did,with increasing intensity, request proposals from the Commission on effective policy
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instruments that could break the increasing emission trends and bring the EU on thepath towards complying with the Kyoto Protocol. In this sense, we can say that theCouncil indirectly requested an EU ETS.Even though these three perspectives and propositions gained varying degrees ofempirical support, they all have something to contribute in explaining how and whythe idea of emissions trading developed within the EU. First, the Kyoto Protocol setthe target and the timeframe, and suggested a new cost-effective policy instrumentthat the EU would have incentives to implement. At the same time, economistsfavouring emissions trading joined the ranks of DG Environment. These factorsappear as necessary conditions for the development of the idea. The EU ETS wouldprobably not have been initiated – or at least not so quickly – in the absence of one ofthese factors. The interplay between the member-states in the Council of Ministersand the Commission also became important. On the one hand, the BEST group inthe European Commission took the initiative, built up independent knowledge, andcrafted support among internal stakeholders. On the other hand, the member-staterepresentatives in the Council of Ministers requested the Commission to developcost-effective policies and measures for complying with the Kyoto commitments.In short, the Commission supplied a policy instrument that could deliver the resultsthat were demanded by the Council of Ministers within the constraints of the KyotoProtocol.In Chapter 5, we discussed to what extent, how and why the relevant actors andinstitutions affected the design and adoption of the EU ETS. Our ﬁrst propositionhere stated that the EU ETS reﬂected the positions of the member-states. Thisproposition gained signiﬁcant, but not full, empirical support. The positions of themember-states were divergent concerning design, but they developed toward moreconvergence in 2001. Against this backdrop, the EU ETS ended up as a basicallydecentralized system, particularly with regard to national allocation of allowances.This provided the member-states with signiﬁcant discretion and autonomy in settingthe cap on emissions. In the subsequent linking proposal process, a majority of themember-states was also able to remove the proposed cap on the import of creditsfrom CDM, and change the time from when linking could start.The ﬁnal observation here was not, however, fully in line with our expectationsaccording to this proposition. Germany and the UK – the two largest member-statesin terms of votes in the Council and share of the allowance market – had to givein and accept a mandatory scheme in the pilot phase. The concessions given tothem in the ﬁnal directive were relatively insigniﬁcant. This shows that individualEU governments did not have control over the collective decision-making processeven though they represented the largest EU states, in terms of votes and shareof the problem. The main reason why the UK and particularly Germany had toyield was that the directive was proposed on the basis of Article 175 (1) of theEC Treaty, which provides for qualiﬁed majority voting in Council. Even thoughthe directive was adopted by unanimity among the member-states, the possibilityof a vote created pressure on these countries to make signiﬁcant concessions. Theskill of the Danish presidency in crafting the compromise, and furthermore internalrivalry within Germany (which weakened its negotiating position), also contribute toexplaining this outcome. Not only did the EU ETS go beyond the ‘lowest common
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denominator’: it also differed signiﬁcantly from the preferences of the two biggestcountries in the system.The next proposition stated that the EU ETS reﬂected the harmonization ambitionsof the Commission and the Parliament, rather than the positions of the memberstates. This proposition gained only limited support, although the Commission, andparticularly the BEST group, continued to play an important role also in this phase.Both the European Commission (at least initially) and the European Parliamentpreferred a more centralized system, particularly with regard to the allocation ofallowances. However, the Commission was able to counterbalance many changesmade to the proposed directive with several harmonizing guidelines and a rightto approval. For example, the Commission now has the right to approve and (ifnecessary) reject NAPs. The Commission was also very active backstage in Councilnegotiations, as the Commission had more than a two-year lead on most memberstates when it came to building up knowledge. As to the efforts of the EuropeanParliament to broaden the scope of the system, the Commission’s formal ability tocounter such moves by rejecting them can help us understand the Commission’ssuccess in this respect.The European Parliament aimed at making signiﬁcant changes to the decentralizednature of the scheme, as well as to coverage and the method of allocation. However,the ﬁnal result was only some modiﬁcations in this direction. For example, theParliament did not get a mandatory cap for each state, but ended up with a formulationthat the total amount of allowances should be consistent with a path towards theKyoto targets. Seeking to explain why the Parliament had such limited impact eventhough it had the power to reject the directive, we identiﬁed three main reasons.First, on many issue the Parliament was up against a powerful alliance between theCommission and a majority of the member-states and industry. Second, the timeconstraint imposed by Kyoto made the Parliament very reluctant to end up as theone who delayed the start-up of the scheme by necessitating conciliation betweenthe Council and Parliament. If that had happened, the Kyoto Protocol deadline of‘demonstrable progress by 2005’ would most likely been beyond reach. Finally, theParliament proposed too many amendments (some 80 in the ﬁrst reading) and fora long time lacked key focal points. The generally-held view that the inﬂuence ofParliament is conditioned by degree of unity and support cannot explain limitedinﬂuence in this case.Non-state actors did only to a limited extent affect the EU ETS in the decisionmaking phase. When decision-making is based on qualiﬁed majority, the inﬂuenceof non-state actors in this phase tends to decrease. For inﬂuence to be effective,lobby activities need to be coordinated across the member-states. Here the chemicalindustry was effective, as it managed to remain outside the scheme. Neither theCommission nor the Parliament was able to withstand the opposition expressed bythe chemical industry, represented by the European industry federation CEFIC. Underunanimity rules, German industry would probably have blocked the adoption of thedirective. At EU level, however, most industry and ENGOs expressed overwhelmingsupport for the EU ETS towards the end of the decision-making phase, even thoughdifferences in opinion persisted on speciﬁc design elements.
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The ﬁnal proposition stated that the EU ETS came to reﬂect developmentswithin the international climate regime. This proposition gained signiﬁcant, butnot full, support. In line with the proposition, we would ﬁrst expect that a crisis inthe international climate regime penetrated internal EU decision-making process.Such a crisis did in fact occur when the USA withdrew from the Kyoto Protocol inMarch 2001. The US exit ﬁrst helped to unify the positions of the Commission, themember-states, the Parliament and non-state actors in support for the basic designof the EU ETS. This was also stimulated by the increased likelihood that the KyotoProtocol would enter into force, following the Bonn and Marrakech agreements inthe summer and autumn of 2001. As noted, the member-states became generallymore positive to the EU ETS in 2001. Second, the US withdrawal placed the EU ETSin the spotlight as the instrument that would give the EU credibility in its ‘saving theKyoto Protocol’ campaign. These effects were mutually reinforcing – the EU ETSrepresented the main instrument for implementing, and, then increasingly, saving theKyoto Protocol.If the US exit from the Kyoto Protocol had led to a collapse in the climate regimeas foreseen by the Bush Administration, the EU ETS would perhaps not have beenadopted. As this collapse did not happen, the Kyoto Protocol continued to affect thespeed of the decision-making process on the EU ETS, through its ‘demonstrableprogress by 2005’ time-limit and the 2008–12 commitment period. These timelimits placed pressure on the EU actors and institutions, particularly the EuropeanParliament, to avoid conciliation and adopt the EU ETS in time for achieving theKyoto commitments. All in all, the Kyoto Protocol and developments within theclimate regime were probably the most important factor in explaining why the EUETS was adopted at all. But even though the EU expected that the Kyoto Protocolwould enter into force, the international climate regime did not signiﬁcantly affectthe speciﬁc design of the EU ETS. This was because the rules for internationalemissions trading were developed for governments, not industry, and they weredeveloped later than the EU ETS.Again, we see that all three perspectives have something to contribute, despitetheir varying explanatory power. The member-state-based perspective explains thedecentralized nature of the EU ETS. The EU-institutional perspective explains whymore auctioning was allowed than favoured by the member-states, and why NAPs hadto be approved by the Commission in relation to the Kyoto target. The internationalclimate regime perspective explains why support for an EU ETS increased in 2001,why the ET Directive did not go into conciliation as many other environmentaldirectives tend to do, and not least why the EU ETS was adopted at all.Chapter 6 addressed the implementation of the EU ETS, and how to explainsimilarities and differences in implementation. As noted above, the criterion wehave applied for assessing implementation is goal attainment, operationalized asenvironmental ambitiousness in the total allocation of national allowances as well aspunctuality in fulﬁlling the implementation tasks, especially the production of NAPs.Unless emission caps can be set far enough below the business-as-usual needs of theparticipating industries to lead to a scarcity of allowances and hence drive allowanceprices high and stable enough to warrant investments in abatement efforts, the goalof promoting reductions of greenhouse gas emissions will simply not be met.
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The ﬁrst proposition analysed was based on the member-state perspective, andstated that a decentralized EU ETS will lead to low but varying environmentalambitiousness due to differing national circumstances. As the NAP I process wasleaning towards the decentralized side, various expectations follow from thisproposition. First, we expected to ﬁnd that the member-states had over-allocated thetotal amount of allowances in relation to projected needs. Our observations for theﬁrst NAP process are in line with this. Based on a combination of expert evaluationsof NAP I and veriﬁed data showing that the total amount of allowances distributedto installations to cover 2005 emissions of CO2 was 4 per cent higher than actualemissions, we concluded that ambitiousness was quite low. As expected, this seemsto have been caused by a relatively low degree of harmonization, which, combinedwith high initial uncertainty and tempo in the allocation process, triggered a ‘raceto the bottom’ dynamics. Each country had incentives to protect its own industriesby providing them with generous allocations. As we shall se below, however, a lowdegree of harmonization does not mean no harmonization, and there are signs thatthe ‘race to the bottom’ dynamics has been counterbalanced in the second allocationround, where uncertainty has been reduced and basic trust among the participantsincreased.We also expected that differences in implementation would be more marked thanthe similarities, and that important explanatory factors could be identiﬁed at thedomestic level. Although most countries seem to have ‘over-allocated’ in NAP I, theveriﬁed ﬁgures for 2005 allocation and emissions further underpin the impression ofsigniﬁcant differences in ambition-level – spanning from Lithuania, which had 51 percent more total allocations than emissions, to the UK, with 17.7 per cent less than itsallocation. We chose to compare the UK, Germany, Spain and Poland, as these fourhave performed differently and represent different EU regions. Our main conclusionhere is that a signiﬁcant degree of variation can be explained by a combination ofdiffering institutional ﬁt between the EU ETS and existing national climate policyinstruments; differing need for ambitious measures targeting the industries coveredby the ETS due to varying progress in relation to the EU Burden-sharing Agreementand Kyoto targets; and differing climate policy progress and ‘drive’.According to the second proposition, a centralized EU ETS will lead to generallyhigh environmental ambitiousness due to common EU criteria. This propositioncannot be assessed in full as the EU ETS was basically decentralized, at least in thepilot phase. However, the preparation of the NAPs was not totally decentralized orunconstrained. Various guidelines and criteria were adopted for allocation, and theCommission had a right to approve NAPs. Even though the initial guidelines werecriticized for being vague and being published too late, the European Commissionused its authority to cut 290 million tonnes from the proposed NAP I total. Thisrepresented around 4.5 per cent of the total allocation of 6.6 billion tonnes. InNAP II, the Commission has so far shaved off around 9 per cent of the allocations.Interestingly, the Commission has rather quietly and almost unnoticed alreadyintroduced in practice a more centralized model for setting caps in NAP II of theEU ETS. This is probably grounded in an increasing realization among memberstates that the decentralized approach they initially favoured has not worked wellenough. Thus, even though the allocation system was basically decentralized, part
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of the explanation of the initially moderate, but now improving, ambitiousness canbe found at the EU level, not least in the Commission’s role as a ‘watchdog’ for thesystem.The ﬁnal proposition stated that a strong link between the EU ETS and the climateregime’s ��