Interaction between EU carbon trading and the international climate regime: synergies and learning

This article discusses the developing interaction and cross-scale effects between the company-focused EU emissions trading (ETS) and the country-focused international climate regime, in particular the Kyoto Protocol. Key questions discussed are first, what has been the character of selected interactions so far—synergistic or disruptive? Second, what kinds of interaction mechanisms have been driving the interactions; normative, cognitive, or utilitarian? Third, with regard to cross-scale effects, has significant learning taken place between institutions at different levels? Four sub-cases of interaction are analysed: first, the interaction between the Kyoto Protocol as source and the ETS as target which started after the adoption of the Protocol in late 1997. Second, a next phase of interaction started in 2004 when the EU states started to develop national allocation plans (NAPs) where bringing in credits/allowances developed under the Clean Development Mechanism (CDM) became one compliance strategy. Third, the opposite relationship is examined, i.e., with the ETS as the source and the Kyoto Protocol institutions as targets. The first phase started after the adoption of the 2003 ET Directive and with the developing ETS possibly leading to a more rapid and extensive CDM development than would otherwise have been the case. Fourth and finally, a separate case of interaction deals with the possible role the ETS plays and could play for an emerging global carbon market. Key findings are that these cases are mainly of a synergistic nature. Furthermore, in order to understand the driving forces, it is necessary to draw upon several interaction mechanisms, particularly cognitive and utilitarian ones. Finally, as to cross-scale learning, the post-2012 global regime may avoid pitfalls related to the allocation process experienced by the ETS. But the learning and diffusion potential should not be exaggerated.