EU Emissions Trading Scheme and an Optimal Mix of Climate Policies

The Emissions Trading Scheme (ETS) creates a framework for reducing EU-wide emissions by placing a price on emitting carbon. As the third phase of the ETS approaches, which will see auctioning of allowances from 2013, it has become increasingly clear that the price signal sent by the ETS will require other policies to drive the deep emissions reductions needed by 2050.

RAP sets out an optimal mix of  "complementary policies" that link with the ETS to help Europe achieve its climate objectives by 2050 at the least cost to society. A smart suite of policies will combine with the ETS to bolster European competitiveness and trigger resource-efficient economic growth.

One of RAP's central recommendations is implementation of a "cap and invest" strategy, whereby Member States set aside a portion of auction revenues for energy efficiency improvements. This approach will help the ETS to deliver least-cost emissions reductions, reduce power bills and maximise the societal value of each euro spent to avoid a tonne of CO2.