The European Union's Emissions Trading Scheme: International emissions trading lessons for the Copenhagen Protocol and implications for Australia?

In preparation for the UNFCCC Copenhagen Conference in December 2009, the world is focusing on the content of the post-2012 climate change regime. In particular, the flexibility mechanisms of the Kyoto Protocol, including international emissions trading under Art 17, must be enhanced if they are to remain meaningful elements of this regime. The European Union's Emissions Trading Scheme (EU ETS) is the first and largest multinational ETS to date. In analysing the successes and failures of and potential improvements to the EU ETS, this article argues that an improved EU scheme should be adapted to suit a global setting and adopted at Copenhagen to improve the current international emissions trading scheme. Due to the growing number of domestic ETSs, a bottom-up emissions trading scheme should be considered as an alternative to a UNFCCC international emissions trading scheme. A study of the implications of linking the EU ETS to Australia's Carbon Pollution Reduction Scheme will prove that bottom-up schemes are a viable means of exploiting this significant emission reduction instrument.