Lessons for California from the EU Emissions Trading System

An Environmental Defense Fund report – The EU Emissions Trading System: Results and Lessons Learned – explores important lessons learned from the world's first cap-and-trade system for greenhouse gases. And these lessons have particular relevance for California, poised to implement its own cap-and-trade system in January 2013.

The biggest take-away lesson from the EU is that cap and trade works. Over the past two decades, the EU has seen its carbon emissions go down even during periods of GDP growth in Europe. That's great news for other countries and states looking to implement their own cap and trade systems.

The other good news is that those responsible for designing California's cap and trade system have been paying attention to the challenges faced by their path-breaking EU counter-parts and have made many pre-emptive adjustments to California's system that will make implementation smoother for all participants.

For example, California will distribute carbon allowances based upon historical emissions data, rather than the industry estimates that were used at the outset of the EU's program.

As full implementation comes into effect in California, EDF will be watching closely to ensure that the Californian design fixes made in response to the EU's challenges have the desired effect when put into practice.