Today it is unthinkable to close the carbon cycle. We live on a planet where human activities have altered the carbon cycle, leading to climate change and acidification of the oceans. Under these circumstances, the European Union has committed to turn Europe into a highly energy efficient and low-carbon economy, with specific targets for the next thirty years, such as to cut 20% of greenhouse emissions by 2020 (in comparison to 1990).
One key action of the EU to tackle climate change is the emissions trading or “cap and trade” system. Since 2005, the EU Emission Trading System (ETS) has set a cap on the total amount of greenhouse gases companies can emit each year. Within this cap, companies receive or buy emission allowances, which they can trade with one another as needed. These allowances are the currency of the carbon market.
Too high caps
The ETS caps were set too high and have remained so. The low carbon price discouraged the widespread shift to clean technology the system is supposed to drive   . According to experts, in order to make a difference, the price of carbon dioxide should be about € 28/ton, rising by roughly 5 percent each year . Today the price in Europe is € 4.35/ton .
However, the metric tons of emissions covered by the EU ETS between 2005 and 2015 decreased by 24%. This represents slightly less than 50% of the total CO2 emissions in the EU. In addition, the EU presented in 2016 a package of measures that included binding annual greenhouse gas emission targets for 2021-2030. The package is directed at sectors that are not regulated under the current EU ETS, which include construction, agriculture, waste management, transport, and certain other industrial activities.
 Hermwille, L.; Obergassel, W.; Arens, C., The transformative potential of emissions trading. 2016, (5-6), 261-272.
 Shipley, D., Europe Needs a Higher Price on Carbon. Bloomberg 2017.
 Brohé, A.; Burniaux, S., The impact of the EU ETS on ﬁrms’ investment decisions: evidence from a survey. Carbon Management 2015, 6 (5-6), 221-231.
 EEX Homepage – Emissions. http://www.eex.com/en/ (accessed 06/18/2018).