Sulfur Emission Trading and Regulation in Europe

Klaassen, G. (1993). Sulfur Emission Trading and Regulation in Europe. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-93-069

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Abstract

How to implement emission trading is only one question in the current negotiations on a new sulfur protocol in Europe. Whereas the current protocol stipulates a 30 per cent uniform reduction, national emission ceilings included in the proposed new protocol imply differentiated reductions. In addition, emission and fuel standards are proposed. This paper examines the costs and environmental impacts of emission trading. A new element is that emission trading is combined with regulations. Calculations, using the RAINS (Regional Acidification INformation and Simulation) model, suggest that overlaying emission trading on regulations does reduce the cost savings but has beneficial impacts as well: ecosystem protection is not changed and significant decreases in environmental benefits for countries are largely avoided. Emission trading can also be used to decrease emissions and increase ecosystem protection. If combined with existing legislation, this minimizes losses in expected environmental benefits for some countries since most countries gain. The initial distribution of emission ceilings, however, has to be used to avoid that some countries are confronted with higher costs. Trade-offs thus appear to exist between using emission trading to achieve cost savings on the one hand and ecosystem protection and distributional equity on the other hand.

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