IMPLEMENTATION OF KYOTO PROTOCOL AND EMISSIONS TRADING

Abstract

Environmental problems that are a consequence of intensive development, competitive market, increased living standards, and energy costs have been brought into the focus of energy policy both in the European Union and in Croatia. This is especially pronounced in the Kyoto Protocol and in the energy sector liberalization processes. In this paper we discuss the possible domestic policies for the implementation of the Kyoto Protocol and their compliance with the energy market liberalisation as well as with global trading rules. Croatia as Annex I party has still not ratified the Kyoto Protocol because of the specific Croatian circumstances with respect to determination of the baseline emissions of greenhouse gases. This paper also explores the impacts of emerging environmental markets such as EU emissions trading scheme on energy sector in Croatia in line with Kyoto Protocol requirements. Directive 2003/87/EC establishing a scheme for greenhouse gases emissions allowances trading within the European Union has launched the biggest emissions trading scheme in the world. The goal is to give efficient economical measure for reducing greenhouse gases emissions in achieving Kyoto targets. Deficit with regard to allowances will be punished, and surplus can be sold or kept for further usage. Buying or selling emission allowances will have great impact on competitiveness of production facilities. With introduction of the Linking Directive 2004/101/EC with regards to Kyoto Protocol project mechanisms (Joint Implementation, Clean Development Mechanism) for emission trading EU ETS, energy utilities have a possibility to increase their emission allowances and plant production. In the paper we are considering requirements for the implementation of Kyoto Protocol, advantages and disadvantages, development of emissions trading in Europe, the influence of the same to Croatia, analysing impact of emissions trading on energy sector and business behaviour.