THE IMPACT OF THE EUROPEAN EMISSIONS TRADING SYSTEM (EU ETS) ON THE EU-COUNTRIES’ SOCIO-ECONOMIC DEVELOPMENT

The goal of the paper: presenting the mechanisms of the EU ETS impact on pollution emissions reduction and, in a consequence – on the rate of socio-economic growth of the EU-countries in short-term and long-term perspective.
Description: the base of the cost-effective reduction of the own greenhouse emissions is elaborated by the European Union, in the form of Emissions Trading System (EU ETS), introduced in 2005, which is the first in the world, international cap-and-trade system realised at the level of enterprise based on the trade permissions on the carbon dioxide and other greenhouses emissions. It was built as a follow up of the Kioto Protocol which includes: International Emissions Trade, Clean Development Mechanism (CDM) and Joint Implementation (JI). This obligatory system triggered the international emissions market’s expansion. Setting the price per ton of the emitted carbon dioxide, EU ETS encourage the investment in less carbon consuming technologies. This system forced managers to take into account the necessity (or at least possibility) of the costs of emissions reduction by finding innovative and less expensive ways of fighting with climate changes. EU ETS is based on the awarness, that setting the price for coal chemical compounds is the most efficient way to radically limit the global emissions of greenhouses, which is necessary to prevent dangerous climate changes. The system is based on the four fundamental principles:
- the cap-and-trade,
- the participation of the enterprise in the sector involved is obligatory,
- system includes strong mechanisms guaranteeing compliance with the rules,
- system includes the EU market, but it also uses reduction of emissions in the other parts of the world thanks to acceptance of credit from the projects of emissions reduction realised in line with CDM and JI, assigned in Kioto Protocol. The most important element of the EU ETS is common trade „currency” in the form of entitlements on emissions. One permission gives the right to the emissions of the one ton of carbon dioxide. Currently EU demands from the membership countries to make national plans of the entitlements for the each trade period. These plans should settle the quantity of entitlements all entities for each year. The limit (called also "cap”) of the total amount of distributed entitlements creates the shortage, which is necessary to materialise the trade exchange. Enterprises which keep their emissions below limit, can sell the surpluses of the entitlements (at the price settled by demand and supply) to the enterprises, which have difficulties to keep emissions in limits of the received entitlements.
Research method: in the analysis models which give the opportunity to estimate influence of the EETS on the reduction of emissions as well as estimating impact on the EU-countries economic growth and development (Ecological Kuznets Curve (EKC)) will be used. Also a model to estimate short-term and long-term influence of the economic policy (according to the energy sectors and environmental protection) on the EU-countries socio-economic development (model E3ME) will be includes to the research framework.