Property in emissions? Analysis of the Norwegian GHG ETS with references also to the UK and the EU

Environmental Law and Management

Volumn 17, Issue 5, 2005, Pages 209-217

  Stavang, Juris Endre ^a  

^a UNIVERSITY OF OSLO   (Norway)

Author keywords

[No Author keywords available]

Indexed keywords

ENVIRONMENTAL LEGISLATION; GREENHOUSE GAS; INTERNATIONAL COMPARISON;

EURASIA; EUROPE; NORTHERN EUROPE; NORWAY; SCANDINAVIA; UNITED KINGDOM; WESTERN EUROPE;

EID: 30644459519     PISSN: 10676058     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (94)

1. This article grew out of an invited lecture at the NorFA Seminar on Climate Change March 13-15 2003 at the University of Oslo, and a draft was presented to Norsk Hydro's Corporate Legal Department on 12 May 2005 and at the 7th Nordic Environmental Social Science Research Conference Gothenburg University 15-17 June 2005. For comments, thanks to Hans Christian Bugge, Erling Eide, Cathrine Hambro, Harald Francke Lund, Nicolas de Sadeleer, Geir Stenseth, Christina Voigt and participants in the seminars and workshops mentioned above.
2. Endre Stavang - B Ed (economics 1989), cand. jur. (1992), Dr Juris (1999) University of Oslo. Member of Law and Economics group at the Centre for Advanced Studies in Oslo (1994-95), Fulbright Scholar, Yale Law School (1995-96), legal counsel, Norsk Hydro (1999-2003), appellate court judge in Oslo (Borgarting 2003-04). (endre.stavangψus.uio.no)
3. 6. See Annex A of Report of the Conference of the Parties on its third session, held in Kyoto, 1-11 December 1997, pp 4-30 (FCCC/CP/1997/Add 1, Decision 1/CP 3), hereinafter referred to as Kyoto Protocol.
4. Act of 17 December 2004 No 99 relating to greenhouse gas emission allowance trading and the duty to surrender emission allowances § 24.
5. Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC.
6. The Greenhouse Gas Emissions Trading Scheme Regulations 2005, UK SI 2005/ 925.
7. Ot Prp (gov bill) nr 13 (2004-2005) p 15 (col 2).
8. Note 3.
9. ibid Kyoto Protocol art 3.
10. On that day, 90 days had passed since Russia had ratified the protocol.
11. The countries are those listed in Annex I of the Climate Convention.
12. Kyoto Protocol (n 3) art 3.
13. Council Decision 2002/358/EC.
14. Kyoto Protocol (n 3) art 17. The other flexible mechanisms therein are Joint Implementation (art 6) and the Clean Development Mechanism (art 12).
15. Under the Kyoto Protocol, each party is under an obligation to implement and/or further elaborate policies and measures in accordance with its national circumstances, art 2 1 (a).
16. 2-equivalents. From 1990-2003 the emissions increased by approximately 9 per cent, increasing by 2 per cent between 2002 and 2003 alone. See 'National Inventory Report 2005 Norway, Greenhouse Gas Emissions 1990-2003 reported according to the UNFCCC Guidelines', April 2005, p 10. If this trend (1-2 per cent increase per year) continues until 2008, the goal for Norway will be to reduce its overall GHG emissions by something around 14-19 per cent during the first commitment period.
17. A Hobley, C Rowe 'Transposition of the Emission Trading Scheme Directive into UK Law and Associated Issues' (2004) JEPL 1, 10-22 at 13.
18. On the general subject of property rules versus liability rules, see eg L Kaplow, S Shavell 'Property Rules versus Liability Rules: An Economic Analysis' (1996) 109 Harvard Law Review, 713-90.
19. Source: personal communication in June 2005 with Harald Francke Lund from the Norwegian Pollution Control Authority.
20. EU ETSD (n 5) art 2, para 1; Annex I, II.
21. UK Greenhouse Gas Emission Trading Scheme 2002, (http://www.defra.gov.uk/ environment/climatechange/trading/uk/pdf/trading-rules_rev2.pdf) and the UK ETS Regulations (n 6).
22. GHG ET Act (n 4) § 9.
23. The allocation of allowances for 2005 was to take place by 15 March 2005.
24. EU ETSD (n S)art 19 para 1.
25. Ot Prp nr 13 (2004-2005) p 61.
26. GHG ET Act (n 4) § 4.
27. EU ETSD (n 5) arts 2 (para 2), 4, 6;
28. UK ETSD Regulations (n 6) parts 2, 3.
29. Norwegian Pollution Control Act § 11, para 2;
30. EU ETSD (n 5) art 26;
31. Directive 96/61/EC art 9 apra 3.
32. Note 4, § 4, 5.
33. This would imply that new entrants who had not applied for permits and allowances by 15 January 2005 have to buy themselves into the market. However, this is a rather theoretical case. The relevant activities are subject to a long planning period, and several new entrants in 2006 and 2007 actually applied for permits and allowances by 15 January 2005.
34. GHG ET Act (n 4) § 5.
35. ibid § 8.
36. EU ETSD (n 5) arts 9, 11;
37. UK ETS Regulations (n 6) 21.
38. Ot Prp nr 13 (2004-2005) p 51, pp 32-6.
39. Ot Prp nr 13 (2004-200S) p 52.
40. Greenhouse Gas Emission Trading Scheme (Approved National Allocation Plan) Regulations 2005 UK SI 2005/1387 pp 22-3.
41. Ot Prp nr 13 (2004-2005) p 48.
42. Due to the limited scope of the act in the pre-Kyoto period, only seven of the 51 decisions by the Norwegian Pollution Control Authority are based on historical emissions, see http://www.sft.no/kvoteregister/ dbafile13028.html. However, if the scope of the act is widened for the first Kyoto period, the number of decisions based on historical emissions can be expected to rise significantly.
43. EU ETSD (n 5) art 10.
44. EUETSD (n 5) art 2 para 1; Annex I.
45. The King may promulgate more detailed regulations, GHG ET Act § 3 paras 2,3.
46. Ot Prp nr 13 (2004-2005) p 39.
47. ibid.
48. UK ETS Regulations (n 6) Sched 1, see reg 2 (1) and 7.
49. Ot Prp nr 13 (2004-2005) p 44.
50. UK ETS Regulations (n 6) 2 (1).
51. This point is made in M Paques 'Les systèmes d'èchange de quotas d'émission de gaz effet de serre dans la Communauté européenne' Aménagement - environnement: Urbanisme et Droit Foncier: Revue d'études juridiques, Numéro special 'l'énergie'(2003) 16-29. Thanks to Nicolas de Sadeleer for translating orally the main content of this paper from French to English.
52. GHG ET Ad (n 4) § 13, para 1.
53. EU ETSD (n 5) art 12 para 3;
54. UK ETS Regulations (n 6) 2 (1).
55. ibid UK ETS Regulations 15.
56. GHG ET Act § 12 para 3.
57. EU ETSD (n 5) art 12 para 4.
58. GHG ET Act § 12 para 2.
59. EU ETSD (n 5) art 12 para 1.
60. GHG ET Act § 13.
61. ibid § 9 para 2.
62. ibid § 8 para 3.
63. US Clean Air Act Amendments (1990) S.1630, § 403 (f) as in DH Cole Pollution and Property - Comparing Ownership Institutions for Environmental Protection (CUP Cambridge 2002) 53-54.
64. WN Hohfeld 'Some Fundamental Legal Conceptions as Applied in Judicial Reasoning' (1913) 23 Yale Law Journal 16-59 at 30.
65. For analytical foundations, see eg A Ross 'TÛ-TÛ' (1957) 70 Harvard Law Review 812-25 at 819;
66. NK Sundby 'Legal Rights in Scandinavian Analyses', (1968) 13 Natural Law Forum 72-107 at 105.
67. A Hobley, C Rowe (n 17) 18-19.
68. This has become more apparent to me after reading JW Harris Property Theory and Property Law: From Formal Dogmatics to Substantive Rights (unpublished manuscript 2003) (on file with the author).
69. K Lilleholt (ed) Knophs oversikt over Norges rett (12th edn Oslo 2004) pp 163-181.
70. Note 15.
71. CM Rose 'Evolution of Property Rights' in P Newman (ed) The New Palgrave Dictionary of Economics and the Law (Macmillan London 1998) 93-97.
72. For outline and discussion, see E Eide, E Stavang Rettsøkonomi - analyse for privatrett og miljørett (Cappelen Akademisk Forlag Oslo 2001) 49;
73. and C Rose 'Economic Claims and the Challenges of New Property' in K Verdery, C Humphrey (eds) Property in Question. Value Transformation in the Global Economy (Berg Oxford, New York 2004) 275-95.
74. J Andenæs Statsforfatningen i Norge (9th edn Arne Fliflet, Universitetsforlaget 2004) 352.
75. The same reasoning can be represented by a diagram, eg the exposition in RS Pindyck, DL Rubinfeld Microeconomics (5th edn Prentice Hall New Jersey 2001) 630 and fig 18.5.
76. Source: personal communication with Per Otto Larsen from Nordpool.
77. Case C-173/73, Italy v Commission (1974) ECR p 709, para 15;
78. Case C-143/99 Adria-Wien Pipeline (2001)ECR 1-8365 para 42.
79. Compare eg RH Coase The Firm, the Market, and the Law (University of Chicago Press, Chicago and London 1988) p 102
80. and Ot Prp Nr 13 (2004-2005) s 37 sp 2, with eg C Jolls, CR Sunstein and R Thaler 'A Behavioral Approach to Law and Economics' in R Ellickson, C Rose and B Ackerman (eds) Perspectives on Property Law (3rd edn Aspen Publishers New York 2002) 221-30.
81. For an exploration of this issue, see LH Goulder 'Environmental Policy Making in a Second-Best Setting' in RN Stavins (ed) Economics of the Environment (4th edn Norton New York 2000) 396-427.
82. For an elaboration of this point, see figure in FR Førsund 'Commentary' in E Eide, R van den Bergh (eds) Law and Economics of the Environment (Oslo Juristforlaget 1996) 116, showing declining marginal abatement costs and increasing costs of harm, both measured in NOKs over emissions. With a perfect market and full payment for emission rights, industry will pay an equilibrium price equal to marginal harm at the prescribed level. Additionally, this price is equal to the optimal tax. In this case, industry has to pay its own costs of abatement up to the prescribed abatement level (A) and the sum of harm (D) and the so-called excess burden (EB). It may be considered unfair that industry should pay both D and EB in addition to A, which might be called a narrow polluter pays principle. If such notions of fairness are a real concern to the population, it should be seen as a benefit of free allocation (grandfathering) that such an allocation principle relieves industry from paying SK and ESB.
83. See L Kaplow, S Shavell Fairness versus Welfare (Harvard University Press Cambridge and London 2002) 18-19: 'The only limit on what is included in well-being is to be found in the minds of individuals themselves, not in the minds of analysts.'
84. Eg RH Coase (n 71) p 118-19, 154-56.
85. NOU 1992:3 Mot en mer kostnadseffektiv miljøpolitikk i 1990-årene; NOU 1996:9 Grønne skatter - en politikk for bedre miljø og høy sysselsetting.
86. Referat fra åpen høring vedrørende Grønne skatter (St prp nr 54 (1997-1998)) mandag den 11 mai 1998 kl 11 pp 1-29;
87. NOU 2000:1 Et kvotesystem for klimagasser: Virkemiddel for å møte Norges utslippsforpliktelse under Kyotoprotokollen; St meld nr 54 (2000-2001) Norsk klimapolitikk; St meld nr 15 (2001-2002);
88. Tilleggsmelding til St. meld nr. 54 (2000-2001) Norsk klimapolitikk.
89. Ot Prp nr 13 (2004-2005) 21-22.
90. A Hobley, C Rowe (n 17) 20.
91. KH Alfsen G Haakonsen KE Rosendahl and K Telle 'Forslag om nytt virkemiddel i klimapolitikken: Lov om kvotehandel med klimagasser' Økonomisk Forum nr 7 (2004) 45-53 at 47-48.
92. The PPP can of course be subject to a much more refined analysis, see eg HC Bugge 'The Principles of "Polluter-Pays" in Economics and Law' in E Eide, R van den Bergh (n 73) 53-84.
93. Eg FR Førsund, Steinar Strøm Miljøøkonomi (4th edn Gyldendal Akademisk Oslo 2000) 98.
94. E Stavang 'Tolerance Limits and Temporal Priority in Environmental Civil Liability' (1997)17 International Review of Law and Economics 553-74.