ARB Research Seminar

This page updated June 19, 2013

The European Experience of Cap and Trade

Iain Morrow, Department for Business, Enterprise and Regulatory Reform, United Kingdom Government (On Loan, Air Resoures Board)

July 09, 2008
Cal EPA Headquarters, 1001 "I" Street, Sacramento, CA



The European Union (EU) introduced a cap-and-trade program for carbon dioxide emissions in 2005. This program covers nearly half the EU's greenhouse gas emissions, and was the first multi-national cap-and-trade program to be set up. It aims to help deliver the national emissions targets that European countries have under the Kyoto protocol, which itself involves cap-and-trade.

Because this was a much larger cap-and-trade program than had been tried before, the period 2005-07 was designated as a trial phase. This trial phase revealed some problems, such as the fact that too many emission allowances were issued. The presentation will discuss the problems and draw lessons for the future. These lessons include the need for a much more harmonized approach to allocation, a higher proportion of allowances being auctioned, and the need to set caps in a more top-down manner, closely tied to previously negotiated targets.

The presentation will also consider the possible future directions for the EU's program, and how that fits with current proposals elsewhere. It will discuss the implications of various design choices for any future linking of cap-and-trade systems.

Speaker Biography

Iain Morrow, a civil servant with the Department for Business Enterprise and Regulatory Reform, part of the United Kingdom Government (UK), is on loan to the California Air Resources Board. Mr. Morrow has worked on energy and greenhouse gas emissions policy since 2003. This included project managing the implementation of the UK's 2003 Energy White Paper, which set out the UK's commitment to a 60 percent reduction in emissions by 2050, and leading on the EU's cap-and-trade program within his Department. Prior to that, Mr. Morrow managed the office of the UK Government's Chief Scientific Adviser.

Before working for the UK Government, Mr. Morrow spent four years as a consultant building economic and financial models for major clients, including the model for the $10 billion financing for the new London to Paris/Brussels train line.

Mr. Morrow received his Bachelors degree in Mathematics from the University of Cambridge, and his Masters (Distinction) in Applicable Mathematics from the London School of Economics.

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