The Global Diffusion of the EU Emission Trading System

In the frame of the COST collaborative international project:
Innovations in Climate Governance: Sources, Patterns and Effects (INOGOV)

Duration: 2014 - 2017

The polycentric climate governance system (i.e. multiple actors working at many levels) poses real challenges for coordinating action and exercising leadership in responding to this vital challenge. This raises also important questions about the role of the European Union in global climate change politics, which has frequently been described as a ‘frontrunner’ or ‘environmental leader’ (Kelemen 2009). What role does the EU play in global climate governance and the global diffusion of policy solutions? Much of the existing research on the EU’s external environmental policy has focused on its role/actorness in multilateral fora. Our research project, by contrast examines the EU’s capacity for diffusing its policies horizontally, focusing on the case of emission trading.

The EU’s Emission Trading System (ETS) is frequently portrayed as the ‘flagship’ of the EU’s climate policy. Yet, the question how the EU seeks to externally promote its domestic ETS as the cornerstone of a global carbon market has received little attention. This is somehow surprising since in the absence of an international post-Kyoto agreement linking the EU ETS with other cap-and-trade regimes may also be regarded as a viable strategy in the establishment of a global carbon market.

Translated into the language of political science, the EU’s strive to link its ETS with cap-and-trade systems of third countries can be conceived as an attempt to transfer EU policies to third countries. Our theoretical point of departure is the literature on ‘external EU governance’ (Lavenex 2011, Börzel and Risse 2012, Lavenex/Schimmelfennig 2009, Schimmelfennig 2010). A common assumption of these works is that patterns of EU policy transfer differ with respect to different geographical circles, with rule transfer becoming less hierarchical, less legalized, and less systematic with geographical distance from the EU increasing. While we broadly agree with this argument, it is the objective of this paper to add to this literature by linking these patterns of rule transfer with the EU’s capacity and willingness to act. Moreover, since EU actorness is not a sufficient criterion for EU influence, it is necessary to include domestic politics of the third country into the analysis (an often overlooked element in the external governance literature).

Specifically, our research is guided by the following preliminary hypotheses:

• H1: The less institutionalized the circle of activity the less the EU can rely on its dominant legal and political power in transferring its policies to third countries.
• H2: The less institutionalized the circle of activity is, the more matters the EU’s level of international actorness (recognition, authority, autonomy and cohesion).
• H3: The less institutionalized the area of EU activity, the more important is the domestic sphere of a third country.

Empirically, our research will cover countries with which the EU has conducted active linking diplomacy. In the highly institutionalized tier, this includes the countries of the European Economic Area (Norway, Iceland, Liechtenstein) as well as Switzerland (bilateral agreements with EU). In the little institutionalized tier this includes US regional initiatives as well as Australia. Looking not only into the EU’s strategy of diffusing its ETS but covering also domestic politics in third countries requires in depth case studies of those countries. Our method for data collection will be based both on secondary and primary sources as well as several rounds of elite interviews.

Together with Jorgen Wettestad (Fridtjof Nansen Institute, Oslo) and Katja Biedenkopf (University of Leuven), Patrick Müller and Peter Slominski organise an international workshop on “Global experimentalism and policy innovation in greenhouse gas emissions trading” that will take place at the University of Leuven, Belgium on 8-9 February 2016. The workshop will bring a mix of high-ranking academics and practitioners to discuss the global spread of emissions trading. It was selected after a competitive process and will be funded by COST.