The EU is profiling itself as a leader in the field of climate change. The Emissions Trading Scheme (ETS) – as the cornerstone of the EU climate change mitigation policy – is central to the EU decarbonisation policy: a strong carbon price should provide investors in the liberalised energy market with adequate signals to move the energy system towards low-carbon patterns. The ETS is also of great importance in the context of the EU external climate policy. It demonstrates to the international community the EU's internal efforts to reduce greenhouse gas emissions, and thus determines the credibility of Europe's leadership on the international climate scene. Moreover, through linking with other emissions trading schemes, export of the acquis communautaire to its neighbours and unilateral actions (e.g. border tax adjustments), the EU promotes the ETS as the model to be incorporated by other countries – a bottom-up approach to the creation of an international carbon market.
Given its key role for Europe's internal and external climate policy, the ETS has received considerable attention in environmental law literature, as well as the literature on environmental policy and economics. However, the environmental law literature has mainly focused on technical issues relating to the necessity to fine-tune the regulatory framework governing the EU ETS (e.g. border tax adjustments, allocation of emission rights), rather than engaging in a conceptual critique of emissions trading. Besides the debate on emissions trading versus carbon tax (a particularly acute issue in the environmental policy and economics literature), the concept of emissions trading remains largely unchallenged in the legal discipline. The EU is thus promoting the adoption of the ETS as the model, even though this model – as legal concept – has not gone through a thorough critical assessment.
Emissions Trading Schemes: Markets, States and Law aims to contribute to the literature of climate law – and, more generally, that of environmental law – literature by proposing a conceptual analysis of emissions trading. In particular, the book under review offers a critical reflection of the way scholars and the EU authorities approach emissions trading. Bogojević (p. 1) announces an ambitious objective: “to discard the generally uniform prism through which emissions trading tends to be projected and subsequently understood as a straightforward instrument that is based on common design features and thus imposable in public law from jurisdiction to jurisdiction to the same effect.” The methodology and theoretical basis underlying the analysis relate to discourse theory and legal transplant theory. Taking a discourse theory approach, Bogojević analyses the narratives on ETS in the environmental law literature, and in policy documents and judicial decisions. Building further upon the legal transplant literature, this analysis takes into account the specific legal culture and institutional framework characterising the EU. On this basis, she identifies different visions of the role of the ETS in EU environmental and economic policy, and highlights different perceptions of the function of the state, markets and law regarding the functioning of this regulatory instrument. With this deconstruction of discourses on the ETS, the book under review aims to demonstrate “the kaleidoscopic understandings of emissions trading that exist in environmental law scholarship and in the EU legal context” (p. 173). Emissions Trading Schemes are not uniform or uncomplicated, as often implied in the EU policy discourse, in particular in the early phases of the design and implementation of the EU ETS. The role of the ETS – and accordingly the role of the state, markets and law (e.g. the legal nature of allowances) – varies depending on the objectives pursued and the legal context within which they take place.
Scholarly writings on emissions trading play a key role in Bogojević's methodological framework and analysis. Assumptions as to the role of emissions trading in the literature are used to identify different visions (models) of this regulatory tool: “economic efficiency”, “private property rights” and “command and control”. In the economic efficiency model, the focus is on the cost-effectiveness and economic benefits of emissions trading. Emissions trading is seen as a “profit centre”. The “private property rights” model emphasises the advantages of allocating to property owners the task of managing common resources in contrast to central government regulation. The creation of tradable property rights relating to greenhouse gas emissions is seen as enhancing individual liberty. In the “command and control” model, emissions trading is seen as providing more flexibility in ensuring compliance with policy objectives. Emissions trading is not seen as a radically new form of regulatory intervention, but rather as a different type of direct regulation.
Based on these three models, Emissions Trading Schemes: Markets, States and Law examines the discourses on emissions trading of the EU Commission and the EU judiciary. The analytical result is fascinating. Bogojević identifies variations in the perception of the EU ETS. Emissions trading is revealed as multi-faceted, pursuing different policy agendas and articulated around different values. The book brings forward and explains different approaches to emissions trading, even within the Commission's own Communications.
This finding might, at first face, seem self-evident to climate change scholars. The decarbonisation of EU's energy supply – and thus the EU ETS – faces different challenges (e.g. sustainability, economic development, social welfare) and touches upon diverging interests (e.g. environmental movements, industry, customers). These diverging challenges and interests can per definition result in internal frictions regarding the objectives underlying the EU ETS and the perceptions of this regulatory instrument. However, even in this context, ETS often continues to be perceived as a uniform and relatively straightforward regulatory tool. In the face of the seeming simplicity of this climate change mitigation approach, policy- and law-makers, analysts, non-governmental organisations and the industry struggle to grasp the different visions of emissions trading. Emissions Trading Schemes: Markets, States and Law is of great relevance for the discipline of climate law because it reveals the complexity and possible contradictions underlying the EU ETS and proposes a conceptual framework to facilitate the understanding of the different approaches to ETS.
Although the book does not engage at length with the current reform plans of the EU ETS, this academic contribution must be particularly welcomed in the context of the ongoing debate on the necessity to intervene with the EU carbon market in order to address the problem of depressed carbon prices. The current price of CO2 in the EU is generally considered to be too low to stimulate investments in the decarbonisation of energy supply. The latter objective is not strictly speaking essential if the only objective pursued with ETS is to comply with absolute emission reduction targets (i.e. ETS as instrument to comply with international climate obligations). It is however essential if the EU wants to move in the most cost efficient way towards low carbon energy systems and take advantage of the benefits of the green economy. The objective pursued with EU ETS will determine the type of regulatory intervention needed. Here again, there is a broad margin of discretion and decisions will eventually depend on the stakeholders' perceptions of carbon markets. Proponents of property rights might be against back loading allowances, because this can disturb investors' expectations and vested rights, and affect legal certainty. In contrast, from an economic efficiency perspective, this intervention can be justified by the necessity to bring carbon prices to a level that will stimulate low carbon investments.
Methodology is a key component and strength of Bogojević's work. The ETS models are based on a thorough overview of the literature on climate law and ETS, including the founders of pollution trading (e.g. Coase). These models provide a refreshing analytical approach in a field that is often characterized by a narrow technical focus – a focus on the necessity to fine-tune the rules of the game to address specific shortcomings in the functioning of emissions trading. Importantly, Bogojević does not pretend to propose definite answers to the conceptual questions underlying the ETS. She recognises the limits of her approach and presents her models-based analysis as just one possible way of approaching emissions trading. Moreover, Bogojević highlights the overlap that exists between the different models and explains how these models relate to each other.
However, the book's rigorous methodological approach often results in superfluous repetitions. The introduction provides a most useful overview of the general structure of the analysis, its methodological foundations and main conclusions. Nonetheless, most chapters consistently re-state the basic methodological approach, summarise the state of the analysis and indicate where the analysis is heading. These repetitions could probably be explained by the fact that Emissions Trading Schemes: Markets, States and Law was initially written as a doctoral thesis. Its commercial publication would have benefited from a more straightforward presentation. It would also have benefited from a more up to date analysis of EU climate law. The book covers the 2009 Directive amending the EU ETS, but the bulk of the analysis focuses on the 2003 legal structure, in particular the first phases of the EU ETS. This focus on the 2003 scheme does not as such affect the quality of the analysis because its conceptual relevance is not limited to a particular legal scheme – not even to the specific case of the EU ETS. However, a more up to date analysis would have helped the reader to reflect on the application of the conceptual conclusions of the book to the current legal challenges facing the EU ETS.
Despite this minor criticism, Emissions Trading Schemes provides a most convincing contribution to the field of climate and environmental law. The discourse theory-based conceptual framework it proposes to analyse emissions trading offers a much needed new perspective to the discipline. This contribution to the conceptualisation of emissions trading is not only useful for academics and students of climate law, but also for practitioners including policy- and law-makers. As illustrated by the issue of interference with carbon prices, the framework developed by Bogojević is most useful to understand diverging positions on ETS and differences in the regulatory approaches proposed to fine-tune this instrument. In addition, the legal transplant perspective in Emissions Trading Schemes is of great interest in the context of ongoing initiatives to reproduce emissions trading schemes around the world, e.g. in China. Thanks to its broader conceptual ambition, Bogojević's analysis of the EU ETS raises questions of greater relevance for ETS around the world.
