ivotal actor for achieving ratiﬁcation of theProtocol, with US exit opening a window of opportunity for the EU to exert globalclimate policy leadership. As we shall see, the EU Emissions Trading Scheme wasto become an important expression of leadership, evolving from an instrument forimplementing the Kyoto Protocol to an instrument for saving the Protocol. The reportof the ECCP, published in July 2001, contained a number of proposals for furtherpolicies and measures. The Commission’s ET directive proposal was put forward inOctober 2001 (Christiansen and Wettestad 2003). This proposal outlined a system thatinitially targeted mainly the power sector and included only CO2 emissions.Although broader climate policy development continued along the lines drawnup by the ECCP, the further and quick development of an ETS became the ﬂagshipof EU climate policy. The ET Directive was formally adopted by the Council inOctober 2003, as Directive 2003/87/EC (Wettestad 2004; 2005). As this Directivedealt with the internal EU system, a subsequent decision-making process produceda directive specifying the links between the EU ETS and the ﬂexibility mechanismsunder the Kyoto Protocol. Political agreement on the Linking Directive was reachedin April 2004. As a main element, the Directive allows CDM credits to be usedalready from 2005 on, and JI credits from 2008. The Directive was formally adoptedin October 2004, as Directive 2004/101/EC.Meanwhile, national implementation of the emissions trading directive waswell underway. A central task here was the drawing up National Allocation Plans(NAPs), setting both total ceilings (caps) for the emissions in the pilot phase 2005–07 and distributing this total among the industrial installations covered. Althoughthe process of completing the NAPs and establishing national allowance registries
9 European Commission (June 1998), COM(98)353, Commission Communication to theCouncil and the Parliament. Climate change – Towards an EU Post-Kyoto Strategy (Brussels);European Commission (19 May 1999), COM(99)230, Commission Communication to theCouncil and the Parliament. Preparing for Implementation of the Kyoto Protocol (Brussels).10 European Commission (8 March 2000), COM(2000)87 ﬁnal, Green Paper onGreenhouse Gas Emissions Trading within the European Union (Brussels).
8
EU Emissions Trading
was delayed, the system was launched according to plan early in 2005 (Wettestadand Sæverud 2005).Research StrategyThe focus for explanation in this study is the rapid development of the EU EmissionTrading Scheme in light of previous EU opposition to emissions trading. Wedistinguish between three main phases. First, the initiation of the ETS, in whichthe development of emissions trading as an idea constitutes our central concern.Second, the formal decision-making between the EU institutions and member-stateson the design, degree of harmonization and adoption of the system. And third, theimplementation phase, in which member-states allocated their emission allowancesaccording to speciﬁc criteria, thereby determining the ambitiousness of the system.As noted, we explore three different explanatory approaches that will provide differinganswers as to what happened and why. This research strategy resembles Graham T.Allison’s classic study The Essence of Decision: Explaining the Cuban Missile Crisis,with three different ‘lenses’ through which analysts can examine events (Allison 1971).11First, the development of the EU ETS may be seen through the lenses of nation-statesand explained by changes in the interests and preferences of the EU member-states. Themember-states may have requested the system, determined the design and allocatedthe emission allowances accordingly. According to this intergovernmentalist approach,which has been elaborated in various ways, national governments are the ultimatedecision-makers within the EU system (on this, see for example Moravcsik 1998).Consequently, the EU institutions have limited independent authority, and primarilyserve the goals of national governments. The state is assumed to be rational, but notnecessarily unitary. Non-state actor interests like industry and ENGOs affect policymaking, but solely through the domestic channel of interest aggregation.Second, the development of the EU ETS can be seen through the lenses ofthe EU institutions and explained by the positions taken and the roles played bythe European Commission, the European Parliament and the European Court ofJustice. Also aspects of the functioning of the Council are relevant here, such asdecision-making procedures. This EU institutional explanation is based on a multilevel governance perspective on EU policy-making (see Hooghe and Marks 2001;Fairbrass and Jordan 2001). This perspective has also been elaborated by severalscholars in various forms, but all share the assumption that supra-national institutionshave an independent effect on policy-making beyond their role as representatives ofnational governments. In addition, this perspective points to the importance of nonstate actors that can inﬂuence EU policy directly at EU level.Third, the development of the Emissions Trading Scheme can be seen throughthe lenses of the international climate regime. Whereas the intergovernmental andmulti-level governance approaches focus on EU-internal explanatory factors, theinternational institutional context has been identiﬁed as one important force towards
11 In Allison’s study these were the Rational Actor, Organizational Behaviour andGovernmental Politics models.
Introduction
9
convergence in EU environmental policy (see Weale et al. 2000). In most areas oftransnational environmental problems, there is an international environmental regimeinteracting with EU environmental policy. In the ﬁeld of climate policy, the mostimportant international context for the EU remain the United Nations FrameworkConvention on Climate Change and the Kyoto Protocol.We will use these three complementary explanatory approaches as heuristicdevices for deriving more speciﬁc explanatory perspectives. From these perspectives,we develop empirically testable propositions related to the various phases of policymaking. These perspectives can be assessed empirically by a means of patternmatching and explanation building (Yin 1989). The better the match betweenproposed and observed patterns in the three phases, the more conﬁdence we willhave in the ability of a given perspective to explain the phenomena it is intended torepresent. A central assumption is, as noted, that the three explanatory perspectiveswill have different explanatory power in different phases. In essence, this work is atheoretical case study in the sense that we systematically apply propositions derivedfrom social science theory to understand the EU Emissions Trading Scheme, usingthe case of the ETS to reﬁne social science theory.Data collection has been based on interviews, ofﬁcial documents and secondarystudies. In various rounds, we have interviewed representatives from industry,ENGOs, the European Commission, the European Parliament, member-states andalso other analysts/researchers. A full list is attached in Annex I.Outline of the BookIn Chapter 2, we present the analytical framework for analysis. While arguing thatthe three explanatory approaches are compatible and may be of differing relevancefor the different policy phases, this chapter develops several testable propositions thatapply to each of the three policy-making phases. As the EU is unique, being neithera federation nor an international organization or regime, it was necessary to includesome general empirical information about how the EU works, in order to make sense ofthe various propositions.12 Chapter 3 focuses on the collective and individual outcomesof the various policy phases: the initiation, decision-making and implementationphases. This chapter takes us from the ﬁrst Communication that hinted at a possibleEU Emissions Trading Scheme, through the formal proposal and adoption of the ETDirective, to actual application at the level of member-states. Chapters 4–6 explainthe developments set out in Chapter 3. In Chapter 4, we explain the development ofthe idea of emissions trading. Chapter 5 focuses on the decision-making phase andexamines the development of the system. In Chapter 6, we assess and explain theimplementation of the system so far, with particular attention to the level of ambition inallocating allowances. Finally, in Chapter 7, we conclude the analysis by summarizingthe empirical ﬁndings, discussing the analytical implications and reﬂecting on thefurther development of the system.
12 For a discussion of the uniqueness of the EU compared to an international regime, seeSkjærseth and Wettestad 2002.
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Chapter 2
Analytical FrameworkWhy did the EU change its position on emissions trading? How did it manage toestablish the world’s ﬁrst international emissions trading scheme so rapidly? Whatare the consequences so far? These are some of the questions behind our effort todevelop an analytical framework for understanding what happened, how and why.We explore the signiﬁcance of three explanatory perspectives: (1) the interests andpreferences of the EU member-states, (2) the role and strategies of the EU institutionsand non-state actors, (3) the international climate regime. These perspectives arederived from three broader explanatory approaches applied to understand EUintegration and policy-making: intergovernmentalism, multi-level governance andregime analysis. Let us start by specifying what we seek to explain.EU ETS Policy-makingThe EU’s turn-about on emissions trading involved three challenges: acceptance ofthe idea, design and adoption of the system and, ﬁnally, practical application. Thesethree challenges can roughly be related to three policy phases in the developmentof the EU ETS: policy initiation, decision-making and implementation. Concerningthe policy initiation phase – from the 1997 Kyoto Protocol to January 2001, whenthe Commission commenced drafting the emissions trading directive proposal – weare mainly interested in why and how the idea of emissions trading evolved withinthe EU.1 In this period, the Commission adopted two Communications on Kyotostrategy and a Green Paper on emissions trading which also initiated the discussionon design options for an emissions trading scheme.The second phase commenced with the drafting and proposal of the emissionstrading directive in 2001 and ran to the ﬁnal adoption of this directive in 2003 andthe linking directive in 2004, which linked the EU ETS to the international ﬂexibilitymechanisms. In this decision-making phase, we ask to what extent, how and whythe actors and institutions involved affected the ﬁnal outcome – the design andadoption of the EU ETS. As noted in Chapter 1, proposed EU directives sometimes1 Notice that this delimitation does not correspond perfectly to the formal legislativephases of EU decision-making. The formal decision-making phase commenced with the ﬁnalproposal for an EU directive in October 2001. As the drafting of the directive – from Januaryto October 2001 – was made subject to signiﬁcant political attention, including consultationmeetings with member states, industry and ENGOs, we will treat this period as a part of thedecision-making process. Moreover, this delimitation will capture the consequences of theUS withdrawal from the Kyoto Protocol within one policy phase. The US withdrawal hadsigniﬁcant consequences for the EU ETS decision-making process (see Chapter 5).
EU Emissions Trading
12
fail, as the EU carbon/energy tax. The adoption of the EU ETS is, however, closelyrelated to the design the system.2 There are many types and variants of emissionstrading schemes, and the issues involved are numerous (see Grubb et al. 1999, 206;International Energy Agency 2002; Lefevere 2005; Delbeke, ed. 2006). In the contextof the EU scheme, two elements appear particularly relevant: the speciﬁc design ofthe scheme, and the degree of harmonization between the EU’s institutions and itsmember-states. These elements have important implications for the environmentalconsequences of the system.Central design elements include:•
•
Type of system refers to the two main approaches to emissions allowancetrading: ‘the absolute target’ approach or the ‘relative target approach’(Lefevere 2005; Sterk et al. 2005). The absolute target approach, or cap-andtrade, is based on a total cap on emissions from the sources covered by thesystem. The total cap represents the collective target that will determine theactual emissions reductions resulting from the system. When the total capis ﬁxed, the market will determine where emission reduction takes place.The relative target approach, or baseline-and-credit, does not set a totalcap on emissions covered by the system. This type is based on an energyefﬁciency baseline which takes into account that technological innovation canbe counterbalanced by increase in activity and production growth. From anenvironmental perspective, the relative target approach carries a higher riskthat the system will not lead to emission reductions if production grows.Coverage refers to the number of greenhouse gases, installations, sectorsand states covered by the system. One important choice here is whetherparticipation should be mandatory or voluntary. If participation is mandatory,the system may nevertheless include rights of exempting (opt-out) or adding(opt-in) sectors and individual installations. Broad coverage in terms of gasesand sectors maximizes the possibilities of ﬁnding the cheapest routes toabatement. Another important choice is the extent to which the system is tobe ‘upstream’, targeting fossil-fuel producers and importers, or ‘downstream’,targeting the end-users of energy – usually the large industrial consumers offossil fuels (Sterk et al. 2005).3 Moreover, emissions trading can either bebased on ‘direct emissions’, covering an installation’s or country’s sources,or ‘indirect emissions’, taking into account the emissions from electricityconsumed by an installation or country (Vis 2006a, 54).4
2 It is difﬁcult to distinguish clearly between the adoption and design of the systemin the decision-making phase. After the acceptance of the idea in the initiation phase, thedecision-making phase was mainly about the design and harmonization of the system. Failureto get sufﬁcient support for a speciﬁc type of ET system would also imply failure to get theEU ETS adopted.3 In an upstream system the installations covered are responsible for the emissions thattheir goods will produce when consumed. In a downstream system, the installations are heldaccountable for their own emissions.4 Under a direct emissions approach for example, if a country increases emissions byproducing electricity that is exported to another country, no adjustment is undertaken for the
Analytical Framework
•
•
•
13
Allocation of allowances: with regard to allocation of carbon allowances,there are primarily two methods: selling them through an auction (auctioning)or giving them away for free (grandfathering). Allocation for free and forpayment can also be combined. The allocation methods chosen determinewhich actors get the economic value of the allowance (Lefevere 2005;Vis 2006b, 190). This implies that the issue of allocation is politicallycontroversial.Compliance and enforcement: compliance at the level of installations canprimarily be deﬁned as having sufﬁcient allowances to cover total emissionsduring the previous compliance period. Emissions trading requires two systems:First, in order to ensure that the ﬁgures that governments use to demonstratecompliance are real, mandatory monitoring, reporting and veriﬁcation arecritical. Second, non-compliance (the failure to hold sufﬁcient allowances)must be dealt with by a ﬁnancial penalty high enough to ensure that it does notmake sense for an operator not to go out and buy from the market a sufﬁcientnumber of allowances to cover the installation’s actual emissions.Links: we can distinguish between links to other domestic and regionalemissions trading schemes and links to the ﬂexible mechanisms under theKyoto Protocol. Here, we focus on the links between the EU ETS and theﬂexible mechanisms. In 2004 the EU adopted an amending directive, linkingthe EU ETS to the Kyoto Protocol project mechanisms Joint Implementation(JI) and the Clean Development Mechanism (CDM).
In addition to speciﬁc design options, the other important element in EU decisionmaking is harmonization. Degree of harmonization has to do with the distribution ofcompetence or authority between the member-states and the Community institutions.A high degree of competence at member-state level provides the latter with signiﬁcantautonomy to take their individual situations into account. According to the subsidiarityprinciple, the Community shall take action to the extent to which objectives can beattained better at the Community level than the level of the individual memberstates.5 Nevertheless, how and the degree to which speciﬁc design features should beharmonized at Community level has by no means been clear-cut.6A fully harmonized and centralized ET scheme can be characterized by a totalcap or target ﬁxed at EU level, identical coverage, harmonization of allocationmethods and linking, and a common system for monitoring, reporting, veriﬁcationand enforcement. At the other extreme, a diversiﬁed and decentralized system canbe characterized by coordination between different types of national emissionsemissions of the exported electricity.5 This principle is based on the 1986 Single European Act (article 174) and expanded toall Community activities by the 1993 Maastricht Treaty.6 In light of the subsidiarity principle, the main rationale for the EU to develop commonand coordinated climate policies in the form of emissions trading is ﬁrst that the Communityhad undertaken a commitment under the Kyoto Protocol to reduce GHG emissions by 8per cent relative to 1990 levels between 2008 and 2012. Second, as emissions trading is aneconomic instrument, a common system is needed to ensure equal economic competitivenessand the functioning of the internal market.
14
EU Emissions Trading
trading systems: cap determined at national level, different types of trading systemswith varying coverage, linking and allocation methods, and national systems formonitoring, reporting, veriﬁcation and enforcement.7 The degree of constraintplaced on the caps (the member-states’ total allocation of allowances) is particularlyimportant in this regard. As noted, the total cap for each member-state and for the EUcombined indicate the environmental ambitiousness of the system.In addition to speciﬁc design and harmonization, the speed of the decision-makingprocess is interesting: What consequences did the rapid pace of the policy-makingprocess have for the shape, content and consequences of the EU ETS? Policy-makingspeed is obviously a relative concept. We have deﬁned the puzzle of this book assurprisingly rapid policy-making in relation to the original scepticism as to includingemissions trading in the Kyoto Protocol, and the novelty and complexity of thispolicy instrument. This puzzle is partly based on the assumption that it normallytakes time for actors and institutions to change, adapt and adjust to new ways ofdealing with ‘old’ problems. The EU has traditionally based its environmentalpolicy on command-and-control and had no previous experience with emissionstrading. Seen from an historical-institutionalist perspective, changes in underlyingconditions will have a delayed effect, because institutions are conditioned by thepast and institutional development tends to be path-dependent (Homeyer 2004). Theother part of the basis for the puzzle is more substantive: The high policy-makingspeed of the EU ETS is evident in relation to other comparable decision-makingprocesses – like the EU energy/carbon tax, which took around 12 years.The ﬁnal policy phase included is the implementation phase. Implementationrepresents the ‘sharp end’ of the EU policy process where supra-national institutionsmeet a decentralized policy delivery system in which the member-states playthe dominant role (Jordan 1999). Compliance at member-state level within theEU context refers to the incorporation of EU legislation in national law, and thesubsequent notiﬁcation of the Commission of this act. Determining whether theends speciﬁed in the legislation are achieved is referred to as ‘application’. Thedistinction between ‘transposition’ and ‘application’ resembles the terms ‘formal’and ‘practical’ compliance (Haigh 1999).Implementation started shortly after the formal adoption of the ET Directivein October 2003, with the production of National Allocation Plans (NAPs) in tworounds: 2003–05 for the ETS pilot phase, and 2005–07 for the Kyoto commitmentphase. In order to assess and compare implementation among member-states,we need a criterion against which actual performance can be assessed. The maincriterion applied here is goal attainment. The principal goal of the EU’s EmissionsTrading Scheme is stated in Article 1 of the ET Directive: ‘This Directive establishesa scheme for greenhouse gas emissions allowance trading within the Community …in order to promote reductions of greenhouse gas emissions …’. As it is too early toassess whether the EU ETS has contributed to any actual reduction of GHGs, we have
7 A mixed system can be placed somewhere in between a fully harmonized or diversiﬁedsystem.
Analytical Framework
15
to apply a proxy for something that will qualify to ‘promote reductions’.8 As furtherdiscussed in Chapters 3 and 6, various criteria are relevant here, such as timeliness.Nevertheless, the fundamental requirement for any environmental added value mustbe scarcity of allowances. In other words, there must be fewer allowances than therewould be emissions in the absence of a trading regime. This simply means that inorder to create a market with an allowance price high enough and stable enough toinduce reductions of any emissions, the target or ‘cap’ must be set lower than thebusiness-as-usual needs of the industries participating in the system.Consider traditional command-and-control based permits aimed at reducingemissions of hazardous substances: a precondition for any added environmentalvalue is that the permits collectively allow less than actual emissions, according tosome baseline. Our operationalization of goal attainment is thus the environmental‘ambitiousness’ of the system, measured in terms of the stringency of allocationsin relation to projected emissions. How the system is designed, harmonized, linkedand applied at the national level will determine the extent to which the system willdeliver environmental ambitions and actual emissions reductions. The EU ETS isan instrument for reducing greenhouse gas emissions and should be credited to theextent that it can be shown to be moving in that direction.Explaining EU Policy-makingIn this section we introduce three approaches for explaining EU policy-making: multilevel governance, intergovernmentalism and the international regime approach.The making of EU environmental policy has been characterized as a primeexample of multi-level governance (Weale et al. 2000; Fairbrass and Jordan 2004).Decision-making competencies and inﬂuence on EU environmental policy-makingare shared at several levels of government – from the sub-national, through thenational to the supra-national and international levels. Another distinctive feature ofEU environmental policy is the competition and cooperation between state and nonstate actors. We might say that EU environmental policy is shaped and implementedin the area between international and EU institutions, national authorities, industryand other target groups, and ENGOs at various levels of decision-making.Multi-level governance has been depicted as an alternative to state-centredintergovernmentalist approaches of European integration and policy-making(Hooghe and Marks 2001; Fairbrass and Jordan 2004). These approaches are basedon different assumptions as to the principle drivers behind EU policy. In general,the intergovernmentalist perspective places main emphasis on the level of nationstates, whereas the multi-level governance approach – despite its name – mainlyemphasizes the EU institutional level. With regard to multi-level governance, twounderlying assumptions in particular are of relevance here.
8 As the system has been in operation for only a short time, a thorough evaluation ofactual environmental effects is not possible. The ﬁrst phase of the system was intended as a pilotphase based on learning by doing. The ET Directive has built-in mechanisms for assessmentand improvement in light of the experience gained in the ﬁrst phase (see Chapter 7).
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EU Emissions Trading
First, supra-national institutions are believed to have an independent inﬂuence onpolicy-making that exceeds their role as agents for national governments (Hoogheand Marks 2001, 3). This means that individual governments do not have fullcontrol over collective decision-making. The most obvious example is the decisionrule of qualiﬁed majority; another example is the exclusive right of the EuropeanCommission to initiate legislation. These examples show that we refer to the terminstitution in a broad sense covering institutions as arenas as well as organizationsas actors (Underdal 2002, 24). Institutions as arenas determine who deals with what,how, when and where. All organizations can serve these functions, but to qualify asnoteworthy actors in their own right they have to provide independent input to thepolicy-making process. In either case, the fundamental basis for the independentinﬂuence of the EU institutions is that member-states have transferred parts of theirsovereignty to the EU, thus making EU institutions supra-national.Second, non-state actors inﬂuence policy-making through both the formationof national preferences and directly at EU level. The separation of domestic andinternational politics is thus blurred by the multi-level governance approach.9 Forexample, industry affects the positions of national governments through nationalindustrial federations and collective EU policy-making directly through theirEuro-federations. Multi-level governance has attracted signiﬁcant criticism. Themost serious is perhaps that it mainly serves as a good but complex description ofcontemporary changes at EU level, rather than pointing to the causal drivers andmechanisms of EU integration and policy-making (Fairbrass and Jordan 2004).The strength of this approach lies primarily in its validity, i.e. ability to capture theessence of the real-world phenomena it is meant to represent.Intergovernmentalism is based on a different set of core assumptions. First,bargaining outcomes are shaped by the relative interests and preferences of themember-states, leaving scant room for autonomous supra-national institutions toinﬂuence policy-making signiﬁcantly (Moravcsik 1998). Supra-national institutionsmainly serve the goals of national governments. National sovereignty is nottransferred – it is delegated to the EU institutions (Moravcsik 1998, 67). Second, thelocation of authority and policy-making inﬂuence at state level implies that non-stateactors form part of domestic societal interests that shape negotiating positions. Assuch, intergovernmentalism is not necessarily based on the assumption that statesare unitary actors.10 However, national arenas provide the sole channel for non-stateactor inﬂuence at the EU level. It is the states that ‘keep the gate’ between nationaland international politics. According to Hooghe and Marks (2001, 3): ‘The core claimof the state-centric model is that policy-making in the EU is determined primarilyby national governments constrained by political interests nested within autonomousnational areas’. Intergovernmentalism has also been criticized for making unrealistic9 Multi-level governance did originally focus on local authorities as sub-national actors,and not on pressure groups, but this latter dimension has become more important over time(Fairbrass and Jordan 2004, 152).10 Intergovernmentalism is often referred to as Liberal Intergovernmentalism, asthe aggregation of national societal preferences by the state is an integrated part of thisperspective.
Analytical Framework
17
assumptions by over-simplifying the nature of international cooperation (Young1999; Fairbrass and Jordan 2004). 11 Compared to multi-level governance, the mainstrength of this approach is that it is more parsimonious. There is obviously a tradeoff between validity and parsimony.Despite these controversies, the intergovernmentalist and multi-level governanceapproaches should be seen as complementary. First, their conception of institutionsis more complementary than competing. They differ more on how internationalinstitutions matter, than whether they matter. Intergovernmentalist approachesemphasize, or at least open up for, one behavioural mechanism (rationality basedon the logic of consequence) through which institutions may affect collectiveoutcomes and individual behaviour. International rules and procedures may alter thedistribution of costs and beneﬁts for individual actors, or mitigate collective actionproblems by reducing transaction costs or reducing incentives to cheat and defect.This approach does not altogether deny the inﬂuence of institutions as actors, but itis extremely sceptical to the inﬂuence of supra-national entrepreneurs (Moravcsik1998, 8).Multi-level governance approaches, on the other hand, tend to assume that actorsare driven by a mixture of behavioural mechanisms (norms based on the logic ofappropriateness) that may be triggered under various conditions: ‘Institutionalizedrules, duties, rights, and roles deﬁne acts as appropriate (normal, natural, right,good) or inappropriate (uncharacteristic, unnatural, wrong, bad)’ (March andOlsen 1996, 251). Thus, multi-level governance opens up for a wider range ofinstitutional consequences than the intergovernmental perspective. For example, theauthoritativeness of international rules may trigger the behavioural response, ratherthan calculation of costs and beneﬁts.12Second, the concept of multi-level governance implies that the interests andpreferences of member-states are important for explaining outcomes. A multi-levelgovernance decision-making system can in some sense conform to intergovernmentalassumptions as to the nature and character of the international process (Weale etal. 2000, 439). This means that competing claims reﬂect a matter of degree in therelative explanatory power of different independent variables. When we add thenature and purpose of these approaches, their complementary nature for studyingpolicy-making in ﬁeld of climate policy becomes even clearer. Intergovernmentalismand multi-level governance are mainly applied to the study of the big questions ofEuropean integration, especially the relevant treaty amendments (Moravcsik 1998;
11 In a rejoinder to Oran Young, Moravcsik maintains that failure and success ininternational cooperation typically reﬂect national preferences, that more rigorous empiricalwork should be undertaken, and that there are broad areas of agreement between them(Moravcsik 1999a).12 Levy et al. (1995, 304–7) have proposed six behavioural ‘models’ or behaviouralmechanisms through which international institutions may have an impact. These includeinstitutions as utility modiﬁers and enhancers of cooperation which are compatible withrationality as behavioural mechanism. Institutions as bestowers of authority and as roledeﬁners take us from the rationality assumption towards norms. For a discussion of theseinstitutional models applied to environmental institutions, see Skjærseth 1999, Chapter 2.
18
EU Emissions Trading
Hooghe and Marks 2001). Thus, much of the academic discussion has focused onthe general direction of integration and not speciﬁc policy-making processes.Moreover, the explanatory power or descriptive value of these approaches islikely to vary from one issue-area to another. It has been argued that multi-levelgovernance is most likely to be prominent in issues deﬁned as ‘low politics’ by themember-states, such as environmental policy (Bache and Flinders 2004, 199). Bycontrast, in areas like common foreign and security policy, decision-making tends tobe more intergovernmental and based on effective national veto. In addition to theircomplementary nature, the ‘grand theories’ are difﬁcult to test empirically becausecentral claims are hard to operationalize. We will regard these approaches as heuristictools of analysis. This means that they point to the relative prominence of variouslevels of decision-making, channels of inﬂuence, and the relative explanatory powerof different variables, rather than competing hypotheses that can be rigorouslytested empirically.13 While bearing this caveat in mind, we will nevertheless extracttheoretically relevant explanatory perspectives and propositions from these generalapproaches.14Common to both intergovernmentalism and multi-level governance is theiremphasis on EU internal factors and processes for explaining EU policy-making andintegration. A central assumption of this book is that neither changes in EU institutionsnor changes in the preferences of non-state actors or member-states sufﬁce to explainthe outcome in this case. In most areas of trans