Hans Vedder

Electricity regulation in the Chinese national emissions trading scheme (ETS): lessons for carbon leakage and linkage with the EU ETS

ABSTRACT Carbon leakage is central to the discussion on how to mitigate climate change. The current carbon leakage literature focuses largely on industrial production, and less attention has been given to carbon leakage from the electricity sector (the largest source of carbon emissions in China). Moreover, very few studies have examined in detail electricity regulation in the Chinese national emissions trading system (which leads, for example, to double counting) or addressed its implications for potential linkage between the EU and Chinese emissions trading systems (ETSs). This article seeks to fill this gap by analysing the problem of ‘carbon leakage’ from the electricity sector under the China ETS. Specifically, a Law & Economics approach is applied to scrutinize legal documents on electricity/carbon regulation and examine the economic incentive structures of stakeholders in the inter-/intra-regional electricity markets. Two forms of ‘electricity carbon leakage’ are identified and further supported by legal evidence and practical cases. Moreover, the article assesses the environmental and economic implications for the EU of potential linkage between the world’s two largest ETSs. In response, policy suggestions are proposed to address electricity carbon leakage, differentiating leakage according to its sources. Key policy insights Electricity carbon leakage in China remains a serious issue that has yet to receive sufficient attention. Such leakage arises from the current electricity/carbon regulatory framework in China and jeopardizes mitigation efforts. With the US retreat on climate efforts, evidence suggests that EU officials are looking to China and expect an expanded carbon market to reinforce EU global climate leadership. Given that the Chinese ETS will be twice the size of the EU ETS, a small amount of carbon leakage in China could have significant repercussions. Electricity carbon leakage should thus be considered in any future EU–China linking negotiations.

The Constitutionality of Competition - EC Internal Market Law and the Fine Line between Markets, Public Interests and (Self-)Regulation in a Changing Constitutional Setting

The EC and its Member States struggle to draw the line between markets and public interests. Traditionally, these two are contrasted, most prominently by the continental Member States and followed by a conclusion that public interests require public governance. Some of this public governance takes the form of a public law framework within which self-regulation by the members of a profession occurs. We also see a more subtle version of self-regulation, whereby regulators are so dependent on specific information from the professions concerned, that they effectively become captive regulators. In those circumstances, the degree to which the public interest, rather than the interest of the professions concerned, is actually served may be doubted.This holds true even more where legislators, both at the EC and the Member State level, are moving the line between markets and public interests towards the market side. It is uniformly recognised that public governance is not the blanket solution for market failures and the introduction of market mechanisms may actually increase consumer welfare. The contrast between public interests and markets may therefore also be rephrased into a citizens versus consumers antithesis. EC (competition) law plays a prominent role in this debate in that it requires member state regulators to rethink how and to what extent their actions serve the public interest. This role of EC (competition) law requires a fundamental rethinking of the market (consumer) and public interest (citizen) antithesis. The hypothesis central to this paper is that EC (competition) law can serve as a democratic instrument to increase legitimacy whilst refining the line between markets and public interests.

Integrating rather than juxtaposing environmental policy and the internal market

This article analyses the recent jurisprudence on environmental protection measures and the EU rules on the free movement of goods. It argues that the Court is at times integrating these considerations insufficiently. A better integration, rather than the classic juxtaposition i.e. the environment vs. free movement presentation, will offer better insights into the Courts case law and thus offer more legal certainty.

No Patient or Illness to be Treated? The Hazards of Investigations Carried Out Under Article 102 TFEU for Price-Related Conduct (The Netherlands)

This article discusses the decision of the netherlands competition authority in the AstraZeneca case and puts this in a broader perspective of regulation in the pharmaceutical market, price regulation and responses to market failures.

No Patient or Illness to be Treated

This article discusses the decision of the netherlands competition authority in the AstraZeneca case and puts this in a broader perspective of regulation in the pharmaceutical market, price regulation and responses to market failures.

Stuck between Climate Change and Competitiveness

This article analyses the external competence of the EU in the field of climate change. Whereas this is formally an area of shared competence, the close relation between climate change and competitiveness could be taken to treat it as a de facto exclusive competence. The enormous impact of climate change policies and the far-going economic and energy interdependence of the Member States result in the requirement to no longer deal with climate change as a purely environmental problem. This refers to the fact that the relatively low transport costs of energy mean that distortions of the level playing field affect not only the outermost Member States, but all Member States. The possibility of having an intra-EU mechanism for dealing with the problem of carbon leakage only increases this competitiveness problem. This in turn influences the legal position of the EU vis a vis its Member States, as is evidenced by the differences in the EU’s negotiation positions in the international climate change negotiations.

State Aid and Selectivity in the Context of Emissions Trading: An Examination of the ECJ’S 2011 NOx Case (C-279/08)

In this recent case the highest EU Court examines the dynamic cap (or PSR) system for NOx emissions trading introduced by the Netherlands from a state aid perspective and notably the selectivity criterion. In this appeal from a judgment by the General Court, the ECJ finds for the Commission on the ground that the measure was selective because only the largest polluters had been granted (tradable, and hence valuable) emission rights free of charge. However the largest polluters were also the only ones caught by the scheme and it would have been impossible to determine the value of the rights up-front in a dynamic cap scheme because it is based on a maximum emission per output (which may tighten over time) but does not constrain the increase in outputs as such. The approach chosen by the Court casts doubt on the ability of Member States to design national schemes that avoid the state aid rules even if they are in line with EU environmental policy. The comments also concern the wider implications of this interpretation of selectivity in the light of recent case law (British Aggregates Association, Gibraltar Tax Reform).

Competition in the EU Energy Sector - An Overview of Developments in 2009 and 2010

This paper examines the competition policy applicable to the EU energy sector. It focusses on the application of the competition rules to the energy sector and also devotes some attention to the emissions market regulations (EU ETS) that are relevant to the energy sector.