Area (2007) 39.

4, 431–442

Blackwell Publishing Ltd

Neoliberalism, climate governance and the scalar politics of EU emissions trading
Ian Bailey
School of Geography, University of Plymouth, Drake Circus, Plymouth PL4 8AA Email: ibailey@plymouth.ac.uk Revised manuscript received 21 June 2007 The neoliberalisation of international climate policy through devices such as emissions trading has led to a significant restructuring of governance competencies between supranational, national and non-state actors. This article explores the implications of this restructuring for the scalar politics of climate governance by examining the European Union emissions trading scheme, the world’s largest multi-state carbon-trading scheme. Analysis shows that although the member states were prepared to accede to a common legal framework for emissions trading, its implementation has been characterised by intense sovereignty disputes over emissions allowances. The article concludes by reflecting on the scalar politics of international climate governance in an unevenly regulated and competitive world. Key words: climate policy, neoliberalism, emissions trading, European Union, scale, regimes

Introduction
Ten years on from the signing of the Kyoto Protocol, the emerging political consensus seems to be that the most effective and efficient way to protect the global climate system is to assign property rights for greenhouse-gas emissions and to trade these rights on international markets (Liverman 2004). Numerous national and international emissions trading schemes have been, or are being, introduced as a result: in the UK and Australia; via the so-called Kyoto flexibility mechanisms;1 and even the European Union (EU), once a stern critic of emissions trading, has a fully-fledged carbon trading scheme. Much recent geographical scholarship on neoliberalism has been critical of neoliberalism as an approach for dealing with environmental problems, and of the apparent agnosticism of many neoliberal reforms to social justice and distributional equity (Mansfield 2001 2004; McCarthy and Prudham 2004; Bakker 2005; McCarthy 2005; Castree 2006; Mansfield and Haas 2006). Nevertheless, the chief sticking point in climate policy implementation over the past decade

has perhaps been less whether neoliberal or command-and-control approaches are ‘superior’ and more whether states (and corporations and individuals) are genuinely prepared to accept a more communal approach to climate issues, even if this compromises current or future economic prospects and/or national sovereignty. However optimistic or cynical one is about emissions trading, there is little doubt that the international institutionalisation of this variant of neoliberalism has major implications for the role of the state in climate governance. On the one hand, effective international trading requires governments to accede, in some form or another, to supranational regimes and authority; conversely, it implies significant entrustment of competencies to the private sector, with governments increasingly assuming the role of market managers (Peck 2001). While this reallocation of functions challenges conventional (mis)conceptualisations of the state as the dominant spatial unit of all political and economic organisation (Agnew 2005), geographical scholarship on the politics of scale has criticised suggestions that globalisation

Area Vol. 39 No. 4, pp. 431–442, 2007 ISSN 0004-0894 © The Author. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007

39 No. Ward 2006) led to renewed interest in how international institutions regularise inter-state relations through the creation of mutually agreed principles. 2007 ISSN 0004-0894 © The Author. Patterson 2000). although the EU’s political structures greatly facilitated the creation of the higher tiers of this regime covering the logic and legal framework of emissions trading. Thus. and the difficulties arising during its implementation. rather than as a new theoretical challenge in its own right. the very existence of the EU ETS represents a significant accomplishment in multi-scale climate governance.432 Bailey and neoliberalism have led to a substantive diminution of state sovereignty and state interests (howsoever defined) as key reference points for understanding contemporary governance trends (Brenner 2000 2001. 2002). The notion of scale as a means of deciphering the structuration of governance has received much attention from geographers in recent years. and the regime gains normative cohesion as these values become ingrained within governments (Joyner 2005). Indeed. with Area Vol. interests and ideas shape regime behaviour. the world’s largest multi-state. As the following sections show. and their implications for inter-state cooperation to reduce greenhouse-gas emissions. These experiences indicate the need for closer scrutiny of the complex scalar politics of international neoliberal climate governance. I focus mainly on the scale literature rather than the neoliberal nature literature. values and policy-making procedures (Kütting 2000). I then outline the genesis of the EU ETS. Thus. the mutually reinforcing qualities of these regimes gradually displace competition as the primary driver of international relations as governments learn shared values. and even then remains vulnerable to distributional shifts in power (CollardWexler 2006). While neorealism provided a reasonably robust account of Cold-War security relations. Although both schematics provide useful insights into how power. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 . their inattention to the possible scalar configurations of these variables caused by cultural diversity. rules. significant problems have emerged during the scheme’s implementation. its legal structures. Swyngedouw et al. Patterson 2000). however. multi-sector carbon trading scheme. 4. the EU would appear to be relatively well-equipped to coordinate the activities of its member states compared with international institutions like the United Nations (UN). Prima facie based on its status as a supranational polity with an established – if complex – legal identity. economic globalisation. Nevertheless. 431–442. According to regime theorists. Brenner and Theodore 2002. Regimes and scales of international environmental politics The rapid rise of environmental issues on the political agenda has been accompanied by an attendant growth in scholarly interest in international environmental regimes (Krasner 1983. before reflecting on the main lessons on the scalar politics of climate governance gained from the EU ETS. neorealists regard the international system as essentially anarchic and characterised by inter-state competition for resources and influence (Keohane 1984. norms. The aim of this paper is to explore how tensions between inter-state cooperation and competition are being managed within climate policy by examining the implementation of the EU emissions trading scheme (EU ETS). Since my ambition is to examine the scalar politics of international emissions trading as opposed to critiquing market-based climate policies. 471). the next section begins by exploring key analytical frameworks developed within geography and other disciplines to analyse the politics of scale in international environmental regime-building. Kütting 2000. Eckersley (2006) nevertheless contends that mainstream international relations has tended to treat the environment as merely a new political problem that can be accommodated within its prevailing positivist epistemologies of neorealism and regime theory (neoliberal institutionalism). has provided scope for important geographical contributions to the analysis of international environmental governance (Mansfield 2001). To re-cap briefly. Thompson 2006. Attention has thus shifted from the idea of fixed and hierarchically-ordered governance scales toward more complex and interwoven forms of political economic interaction wherein the state remains an important ‘scale as dimension’ (Mansfield 2001 2005. power relations and state capabilities are the dominant factors governing international relations and collective action is structurally constrained by fears of losses to other states unless it can be induced or coerced by a hegemonic state actor. pp. Jessop 2000 2004. the emergence and durability of various multilateral environmental ‘regimes’ under the aegis of the UN and the EU (Vogler 2005. the spatial and social interconnectedness of environmental problems or the countervailing forces of resurgent nationalism and regionalism. much remains to be learned about how the international institutionalisation of market instruments is altering the scalar politics of climate governance and how these changes affect the prospects for such regimes to deliver more cooperative climate protection strategies.

Relating these insights to environmental governance first requires identification of the main scales-asdimensions relevant to international regime-building. regional and local entities (Jessop 2002. second. is that we no longer need to downplay one scalar dimension in favor of others. each with varying levels of connectedness to physical or self-referential spaces. 431–442. 39 No. Space constraints prevent a detailed review of this literature. 2002. 2002. corporations. and we can incorporate the national back into accounts of neoliberalism and broader political economic change. there are the incorporeal scales of ‘the market’. and formal (legal) and practical implementation (Christiansen and Wettestad 2003. Dalby 2002. the competitive vulnerabilities created by these configurations coupled with the delegation of key decisions to footloose market forces create an inherent tension with traditional conceptions of territorial statehood and self-determination. Thus.Neoliberalism. the national remains an important dimension of politicaleconomic practice. state behaviour during different stages of regime formation and implementation remains an under-explored aspect of environmental governance. regional and local ‘scale’ actors (Brenner 2000 2001. Peck and Tickell 2002. 471) Rather than trying to uphold the image of states marginalised by neoliberalism and globalisation. Liverman 2004. The Kyoto Protocol and the initiation of the EU emissions trading scheme Despite the EU being a signatory to over 60 multilateral environmental agreements. first.3 Although the importance of the national to these regimes is self-evident. 2005 and associated discussion). trade liberalisation and various other quasi-market reforms (Mason 2001. First. empirical investigations of ‘actually existing neoliberalism’ (Brenner and Theodore 2002. political and economic legacies that inform state evaluations of multilateral cooperation2 and. de-regulation. a common theme therein is the difficulties of assigning rigid spatial scales or hierarchies to certain processes. 471)) instead of superordinate and subordinate layers. which. cultural. and how these elucidate the shifting interplays between supranational. Although most governance regimes involve some hierarchy of geopolitical scales and power relations (Brenner 2001. the signing of agreements. however. whether to determine political jurisdictions or simply to make phenomena comprehensible (Cidell 2006). as Mansfield (2001) and Mansfield and Haas (2006) argue. Peck 2001. Jessop 2005). second. 349) in response to literature de-emphasising the national stress that such ‘glocalisation’ has neither ended state power nor eroded the production of the national as a relevant scale. their entry into force. Mansfield and Haas 2006). privatisation. states continue to play a crucial role in constituting and shaping globalisation. Brenner and Theodore 2002. third. (2005. even if it is no longer analytically useful or empirically accurate to visualise it as an isolable and discrete spatial scale (Jessop 2004). Swyngedouw et al. The crucial advantage of this approach. On the one hand. and. responsibilities and obligations created by state affiliations to multilateral institutions. expressed in terms of installations. Rather. 4. although not devoid of hierarchy. In addition to relations between these systems. is a view of scale as multiple forms of scalar structuration. At the same time. What materialises. and most obviously. there are the selective norms. pp. rather than as stable scalar arrangements or pyramids of extent or influence (Brenner 2001). one must also consider the temporalities of environmental regime-building in terms of. regime evolution from the initial acceptance of regime norms and goals through to policy negotiation. the institutional. is socially and geographically constructed as mosaics of interaction. international Area Vol. sectors and capital markets. then. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 . economic and social territories overseen by governments. Agnew 2005). Conversely. 2007 ISSN 0004-0894 © The Author. McCarthy and Prudham 2004). as Mansfield puts it. there are the geophysical. The remainder of the paper now examines how these tensions have been managed in the implementation of the EU ETS. affiliation implies a preparedness to accept new configurations of statesupranational cooperation. Swyngedouw et al. climate governance and EU emissions trading 433 discussions on the theoretical and ontological properties (and even the validity) of scale production (see Marston et al. Jessop 2005. Thompson 2006). geographical questioning of the conceptualisation of states as isomorphic and indivisible sovereign rulers over discrete territories has gathered momentum as neoliberalism and globalisation have refashioned state structures through the upwards and downwards rescaling of powers to international. and in reasserting jurisdictional powers even as state boundaries and scales become more porous as a result of devolution. the main emphasis is on dynamic actor relations (scales-as-dimensions (Mansfield 2005. national.

0 billion per annum and lessen competitive distortions. the Council crafted an internal compromise which accepted the logic of emissions trading provided it remained supplementary to domestic action and coordinated measures.6 –5 per cent (Viguier et al. trading. allowing it to reapportion its aggregate Kyoto target between its member states. estimated that the annual cost of the protocol to the EU would be a9 billion by 2010 if each state implemented its Figure 1 The EU burden sharing agreement (per cent change in emissions from 1990 baseline) Source: European Environment Agency (2006. see Grubb et al. EU and member-state delegates were nevertheless united in their support for mandatory emissions cuts by developed nations. provided a licence for governments to avoid domestic cuts in greenhouse-gas emissions (Damro and Luaces Méndez 2003). 4. 2007 ISSN 0004-0894 © The Author. whether the preliminary phase (2005–2007) should be mandatory or voluntary. Having agreed to reduce its overall emissions to 8 per cent below 1990 levels by 2008 –2012. internal differences must be resolved prior to agreeing a negotiating mandate (Vogler 2005). and.4 which argued that greenhouse gases affect the climate system regardless where they are released and what mattered. Spurred by these assessments and concerning emissions trends (Figure 2). 39 No. for instance. including binding commitments to emissions cuts. they argued. 431–442. surrender and banking of permits. pp.434 Bailey environmental diplomacy remains an area of shared competence with the member states. was maintaining a flexible approach. (1999. For a fuller account of these negotiations. used with permission BSA target independently. The EU’s opposition to emissions trading also encountered strong opposition from the US. In the pre-Kyoto negotiations. while other studies indicated that meeting the Kyoto target without trading could increase annual welfare costs in some EU states by 0. with the Commission overseeing compliance with common policies agreed by the Council of Ministers. One study by Capros and Mantzos (2000). Faced with the prospect of destroying the Kyoto Protocol by obstructing a measure which it perceived (mistakenly as it turned out) would persuade the USA to accept emissions targets. Although this represented an important step toward the creation of an EU climate regime. whose domestic policies were strongly oriented towards Area Vol. and national and regional governments controlling most aspects of practical implementation (Gupta and Ringius 2001). therefore. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 . Responsibility for implementing international agreements is also shared. the Commission began producing optimistic policy documents on emissions trading and in 2001 developed a formal proposal for a directive establishing the EU ETS (European Commission 2001). the Commission still needed to resolve a number of key issues. provoked accusations of double standards from US and Canadian negotiators on the grounds that it allowed wide differentiation within the EU while denying similar rights to other countries (Sbragia with Damro 1999). It also had to overcome lingering suspicion in member states like Germany. Copenhagen. 2005. including: rules for the allocation. and in their scepticism toward the excessive use of international emissions trading which. the ‘economies-in-transition’ and other members of the JUSSCANNZ alliance. 89– 96). 12) © EEA. 2003). and the scheme’s potential conflicts with the UK’s voluntary trading scheme and proposed Kyoto arrangements (Christiansen and Wettestad 2003). thus. the EU’s defence of a ‘bubble’ arrangement. but that emissions trading across all states and sectors could reduce costs by a3. At the same time. the EU moved swiftly to redistribute this target between the member states under the EU Burden Sharing Agreement (BSA) (Figure 1) and began to reappraise its stance on emissions trading following the publication of several reports on the Kyoto targets.

2005. agreed in December 2003. and the high profile of emissions trading at Kyoto. 4. pp. though another factor was undoubtedly a desire to avoid a repeat of the deadlock that occurred over proposals for harmonised EU carbon/energy taxes. First. utilising the complexity and uncertainty of the climate issue to persuade reluctant member states that the EU ETS was a plausible and progressive instrument for achieving the EU’s climate goals. to allow the full operation of its trading scheme. temporary opt outs to 2007 were negotiated for certain sectors in some member states. The compromise text.5 However. In keeping with subsidiarity requirements. the Commission acted as a proficient policy entrepreneur. the emissions trading directive was negotiated with surprising speed and efficiency. the USA’s withdrawal from the protocol in 2001 provided the EU with an opportunity to show global leadership by demonstrating the possibilities of this instrument. the EU debate on emissions trading was more mature than was outwardly evident as a result of emissions analysis. 39 No. Third. the lack of effective common policies. 431–442. Wettestad (2005) attributes this to three factors. used with permission industry self-commitments and energy taxes (Bailey and Rupp 2005). national emissions caps for affected sectors were to be set by member-state governments using national allocation plans (NAPs) covering two Area Vol. Copenhagen. Considering its complexity and sovereignty implications. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 .Neoliberalism. where several states objected to the sovereignty encroachment implied by pooled taxation measures (Zito 2000). positive figures indicate shortfalls Source: European Environmental Agency (2005) © EEA. making Europe a less attractive location for the industry (Kruger and Pizer 2004). Second. The aluminium sector was also granted a blanket exemption on the grounds that global aluminium pricing by the London Metal Exchange meant that European manufacturers would need to absorb any additional costs generated by the EU ETS. created a cap-and-trade scheme for carbon dioxide (CO2) emissions. notably the UK. climate governance and EU emissions trading 435 Figure 2 Distance to target for the EU-15 in 2003 Note: Negative figures denote progress in advance of EU Kyoto and BSA targets. 2007 ISSN 0004-0894 © The Author. with mandatory participation from January 2005 for over 12 000 installations that met the requirements shown in Table 1.

The UK’s hope that other member states would adhere to its NAP methodology also proved baseless when most governments issued generous allowance Area Vol. 4. To guide this process. The implementation of the EU ETS Phase-one allocations The UK was the first member state to submit its draft NAP in January 2004 in the hope this would provide a template for other NAPs and lead to a relatively harmonised approach on key issues (Environmental Data Services (ENDS) 2004). pulp from timber or other fibrous materials 2. pp. the government soon discovered that its provisional figures underestimated the UK’s projected emissions for phase one and requested an increase in its allocation from 736 to 757 million tonnes of CO2 (MtCO2). the most important of which state that plans must reflect the country’s actual and projected progress towards Kyoto and BSA targets. rising to a100 per tonne in phase two (Official Journal of the European Communities 2003). Having established this legal-procedural framework. the next stage was the submission of phaseone NAPs detailing national emissions caps and the methods used to distribute allowances to affected installations. The penalty for non-compliance is a40 per tonne of excess CO2 during phase one. However. including glass fibre with melting capacity over 20 tonnes day−1 Installations producing ceramic products by firing with production exceeding 75 tonnes day−1 and/or kiln capacity exceeding 4 m3 and with setting density over 300 kg/m3 Other activities Industrial plants producing: 1. the directive also permits 95 per cent of allowances to be issued free of charge during phase one. Annex III of the directive provides criteria for the preparation of NAPs. 431–442. In addition. Britain launched legal proceedings to force the Commission to consider the detail of the proposal.436 Bailey Table 1 Activities Energy activities Combustion installations with rated thermal input exceeding 20 MW (except hazardous or municipal waste) Mineral oil refineries Coke ovens Production and processing of ferrous metals Metal ore (including sulphide ore) roasting or sintering installations Installations producing pig iron or steel (primary or secondary fusion) including continuous casting.5 tonnes hour−1 Mineral industry Installations producing cement clinker in rotary kilns with capacity exceeding 500 tonnes day−1 or lime in rotary kilns or other furnaces with capacity exceeding 50 tonnes day−1 Installations for glass. When this was rejected by the Commission without scrutiny because the application was lodged after the deadline for amendments. 38) Sectors covered by the EU ETS phases. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 . NAPs must also not discriminate between companies or sectors and must be consistent with other Community policies. However. Installations may then trade permits freely between sectors and member states to concentrate abatement where it can be achieved most cheaply. the Court of First Instance upheld the Commission’s judgement and the government decided not to pursue further court action (ENDS 2006). the guidelines stipulate that allocations to installations must reflect their abatement potential (including technological potential) and must not be higher than they are likely to need. this reduces to 90 per cent in phase two. the scheme’s trial period (2005–2007) and the Kyoto commitment period (2008–2012). paper and board with production capacity exceeding 20 tonnes day−1 Source: Official Journal of the European Communities (2003. 39 No. In order to assuage fears about the economic impacts of allocations. 2007 ISSN 0004-0894 © The Author. but each April installations must surrender allowances corresponding to their actual emissions that year. with capacity exceeding 2.

2007 ISSN 0004-0894 © The Author. The Commission also recommended that allocations by states on course to meet their Kyoto targets. (2005) blamed most over-allocations on insufficient governmental scrutiny of industrial claims about competitive disadvantage and inadequate guidance from the Commission to ensure the coordination.Neoliberalism. sought to force the issue by informing ministers attending an EU Environment Council meeting that the draft NAPs received at the time amounted to a 15 per cent increase in allowance allocations compared with verified emissions for 2005. In February 2007. The Commission also opened legal proceedings against Luxembourg for not communicating its future greenhouse-gas projections or its general policies to address climate change. In November 2006. Slovenia and Spain for late submission. Lithuania. They also noted that many ‘business-as-usual’ emissions forecasts (the baseline used to calculate allocations) may have been inflated by industry to protect against uncertainty and to facilitate target achievement. climate governance and EU emissions trading 437 allocations to their key industries. Collectively. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 . anticipating a similar fate. creating short-term over-supply in the emissions market and depressing allowance prices and trading (Grubb et al.to medium-term rises in electricity prices (Sijm 2005. weaken incentives to invest in abatement. Even so. Various justifications were given for these liberal allocations. In October 2006 the Environment Commissioner. Grubb et al. Denmark. Food and Rural Affairs (DEFRA) 2006). 431–442. He added that if member states put more allowances into the market than were needed to cover real emissions. Germany and Luxembourg had already received first warnings in April 2006 and were sent final letters in October (European Commission 2006a). the More problems in phase two Having finally resolved outstanding phase-one problems. should not exceed those in phase one. and negate the system of fines introduced for noncompliance. this would depress carbon prices. Several studies also indicated that the EU ETS was likely to trigger short. while France. like the UK. France. withdrew its NAP on the eve of the appraisal to revise it. its assertiveness has paid some dividends.and export-dependent industries like steel and cement. Green 2005. and the latter two were only agreed in May and June 2005 (European Commission 2005a). Although the Commission has limited powers to enforce a more centralised approach. comparability and transparency of NAP methodologies. the Commission rejected nine of the ten phase-two NAPs submitted at the time because they planned for larger allowance issues for 2008–2012. while the Belgian and Dutch NAPs were also rejected in January 2007. Polish. When the scheme came into operation in January 2005. while others noted that stricter allocations for energy providers would create an unacceptable double penalty for sectors that were already paying national energy-consumption taxes (Department for the Environment. Hungary. Finland and Italy) (European Area Vol. the Commission was still contesting the Czech.6 per cent and 5. and also by governments to minimise the asymmetrical political risks of under-allocations caused by the different emissions targets agreed (or not) by other countries inside and outside the Kyoto Protocol. Lithuania and Poland received formal warnings for not providing historical emissions data needed to establish permitted emissions levels. Denmark. in what Dimas called ‘a credibility test for Europe’. Luxembourg and Slovakia each allocated allowances more than 25 per cent above recent emissions.06 billion allowances – a 6 per cent reduction from phase one – and cuts of 15–25 per cent for countries that were projected to miss their BSA targets (Austria. 39 No. Estonia.1 per cent respectively below their original phase-two NAPs. Linares et al. In the event. the Czech Republic. with Dimas insisting on emissions reductions of 7. Italy. 2006). Portugal. Italian and Greek NAPs. pp. However. significantly higher than the EU’s Kyoto targets (Dimas 2006). in October 2006 the Commission issued first warning letters to Austria. phase-one allocations agreed by October 2004 exceeded emissions during 1998– 2002 by 3 per cent for countries that reported historical emissions. Spain. while Finland. the Commission signalled its determination to take a tougher stance during phase two by proposing an annual EU-wide cap of 2. Greece. Environment Agency 2006). foremost of which was concern over the competitive impacts of carbon prices on energy. Stavros Dimas. However. and demanded that all states offer more robust information on their NAPs and other measures to reach Kyoto targets (European Commission 2005b). 4. cracks in the process soon appeared when the Commission was forced to postpone the original June 2006 submission date for phase-two NAPs because most member states indicated that they would miss this deadline. despite reporting substantial surpluses in 2005–2007 (European Commission 2007a) (Table 2). only Germany and Slovenia did not allocate more allowances than they emitted at the time. 2005).

2 Phase 2 Commission proposed cap 2008–12 Member state Belgium Germany Greece Ireland Latvia Lithuania Luxembourg Malta Netherlands Slovakia Sweden UK 62.9 474. Whether these are realistic ambitions depends ultimately on the member states’ willingness to accept greater central direction from the Area Vol.9 MtCO2 per year. It also noted that the Commission’s calculations did not reflect the strong growth of the Slovak economy or the decommissioning of reactors at the Bohunice nuclear plant agreed as part of Slovakia’s accession treaty (EurActiv 2007a).2 19. These proposals.9 95.5 453.8 246. However.0 80. a number of member states have sought to overturn Commission decisions.4 2. though Slovenia has relatively undemanding targets under the protocol (European Commission 2007b). 39 No.7 16. and expanding the auctioning of allowances.7 per cent and 14. Even so.2 Source: European Commission (2007a. Moving forward.3 8.0 90. 4.8 30. include expanding emissions trading to air transport. Forecasts in 2006 suggested that at least 10 member states will need to utilise Kyoto mechanisms (Table 3) and that. the inclusion of more greenhouse gases.3 22.4 41.5 per cent of the EU’s reduction commitment may be met this way (European Environment Agency 2006). further blows to its credibility may increase pressure for a taxation or mandatorytargets approach (Grubb et al. the Commission has sought to restore policy momentum by setting out its agenda for the EU ETS beyond 2012 (European Commission 2006b). 2005). which it claims are intended to ‘build a global carbon market’.3 3.4 25.6 12.6 4. these disputes might be regarded as largely foreseeable (Jordan 1999).8 2. In May 2007. Given the EU’s chequered history on environmental policy implementation. adding that the complicated model for calculating emissions and lack of data transparency prevented adequate consultation on emissions levels (EurActiv 2007b).9 245. arguing that the Commission had no competence to dictate how national quotas are calculated. around 32. the Commission will need to fight a strong rearguard action to ensure NAPs are endorsed early enough to prevent some member states from having to make more widespread use of the Kyoto flexibility mechanisms to meet their BSA targets than the EU would wish given its commitments to strong domestic action and proving the viability of international emissions trading. harmonising member-state allocations under an EU-wide cap (set by the Commission). 431–442.6 7.3 58.9 22.1 499.438 Bailey Table 2 Summary of national allocation plans submitted by November 2006 (million tonnes of CO2) Phase 1 cap 2005–7 2005 verified emissions Phase 2 member state proposed cap 2008–12 63. 8) Commission approved Slovenia’s NAP as consistent with its Kyoto commitments and its potential to reduce emissions. Finally. Slovakia lodged a complaint against the Commission’s demand that it reduce its allocation from 41. 2007 ISSN 0004-0894 © The Author.0 74.4 2. Although there is little indication that EU ETS is in danger of unravelling.0 71. pp.3 242. the Hungarian government issued a statement that it could not rule out court action against the Commission for ‘ordering’ a 12 per cent cut in its NAP 2 allocation (EurActiv 2007c). Poland and the Czech Republic also announced legal proceedings.0 75.6 2. in April 2007. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 .6 2.2 246. though past experience suggests that it would be extremely hard to navigate either of these through the EU policy process. In February 2007.1 21.1 85.5 22. overall.3 30.1 to 30.3 4.9 6.3 55.3 25.5 22.0 3.1 69.7 2.2 3.3 482.8 per cent to their proposed allocations – were discriminatory and would prevent their industries from catching up with Western Europe. claiming that the Commission’s conditions for accepting their NAPs – which included reductions of 26.4 22.

5 –28. During discussions on the concept and legal framework of EU emissions trading.0 –0. although it is too soon to predict the impact of these disputes on the long-term performance of the EU ETS.7 15.0 16.0 –7.7 15. the case also clearly illustrates the continued importance of the state – and state interests – to this new environmental-economic ‘paradigm’ (Jessop 2002.0 NA NA 6. 4. the overriding priority was to demonstrate unity of purpose to the outside world.1 27. Copenhagen. climate governance and EU emissions trading 439 Table 3 Country EU-15 targets and emissions based on national projections Target (per cent from baseline) Gap to target (per cent relative to base-year emissions) With existing policies and measures (PAMs) 27.0 0. In relation to rescaling.5 0.4 5. 22) © EEA.5 NA 18. style and substance are occurring as a result of the EU ETS. however. a key characteristic of this dynamic has been the shifting nature of state scalar orientations during different stages of regime formation.8 All PAMs. 39 No.0 0.0 25.3 6.0 –2.3 0.0 –5.0 –6. KMs and carbon sinks Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK EU-15 –13.9 –11.8 NA –1.6 19.0 27. it recognised that this instrument provided much-needed flexibility to climate policy and moved to create a scheme that it hoped would provide a template for wider international cooperation on emissions trading (Michaelowa and Butzengeiger 2005).9 6. the EU was intent on demonstrating to the US and other sceptical nations the feasibility and benefits of early collective action on climate change. In the event.3 7.5 –21. 2007 ISSN 0004-0894 © The Author.0 13.7 16.0 NA = Data not available or not presented Source: European Environmental Agency (2006.6 20. this accord has progressively corroded as states have adopted a more Area Vol.4 0.2 2.6 12.0 –6.6 29.7 3.4 –7.3 NA NA 0. implementation of the EU ETS has led to protracted disputes between the Commission and the member states over emissions allocations and.7 –5.7 25.4 With additional PAMs All PAMs and Kyoto mechanisms (KMs) 7. Each element of the scheme required the unanimous approval of the member states. pp.6 NA 6. 431–442. Conclusion: state territories and collective climate-governance regimes Post-Kyoto. Despite its initial distrust of emissions trading. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 .4 1.3 NA NA NA 10. Mansfield 2001).8 –18. Although shifts in governance scale.0 15.1 NA 10.Neoliberalism.0 –21.5 –8.0 0.0 – 4.4 6.0 –12.6 9. used with permission Commission and the reactions of other countries to EU emissions trading.9 0. while a decision has yet to be reached as to whether the Commission has the executive authority to order governments to rewrite their national allocation plans. the case highlights broader geopolitical stresses between the ideals and realities of inter-state cooperation on climate change that both challenge and enrich our understanding of the scalar politics of international neoliberal climate governance.4 0. the study revealed minimal evidence that the institutionalisation of international neoliberal climate regimes has substantively marginalised the state as a key axis of political-economic negotiation.2 9. However.2 9.8 3.0 –6.7 NA –2. 2005.8 8.7 NA NA –10.0 4.9 18.

the institutionalisation of neoliberal climate policies at the international level is intensifying and producing new patterns of interaction between supranational. 3 Measures of regime effectiveness are themselves highly contestable and can be interpreted in various ways. Notes 1 International emissions trading. Current disputes may be just a foretaste of more acrimonious struggles to come as companies and governments discover the full competitive implications of international market instruments in an unevenly regulated and competitive world. rather. Acknowledgements The research for this article was supported by grants from the Economic and Social Research Council (Ref. New Zealand). R000223774) and the British Academy. and through the national state. 2007 ISSN 0004-0894 © The Author. 5 An installation is defined in the directive as a stationary technical unit where one or more named activities are carried out and other associated activities with a technical connection with activities on that site which could have an effect on emissions. original emphasis) (and coercion is unlikely to be the answer) or more nations volunteer to break the mould (as the UK is arguably seeking to do). Australia) or have highly efficient energy-supply systems with little scope for major emissions cuts without significant economic burdens (Japan. 4. (2001. it should be remembered that this article has only explored tensions during the allocation of emissions allowances and it remains to be seen how future conflicts between market. and national governments attempt to reconcile their principled allegiance to climate cooperation with the protection of territorial interests against the often obscure scalar operations and allegiances of market actors. parallel debates on neoliberalism. whether by neoliberal or other means. while ‘thinking in terms of multidimensional scalar relations. 472) provides a richer description of the fluctuating scalar nature of international climate governance from one stage of regime formation to the next. 2 As Jessop points out. achieving set policy goals (unambitious or otherwise). climate governance and the politics of scale. globalisation does not mean that territoriality itself in somehow less relevant. or actually solving the problem (Kütting 2000). but rather that a more complex set of territorialization processes are at work in. . Finally. as new rules and roles are adopted to oversee emissions markets. all points on the globe. while their re-emergence has forced it to operate at the very limit of its powers to prevent the scheme from losing credibility. Nevertheless. As Peck observes. the prospects of international carbon trading making a serious contribution to reducing emissions seem rather bleak. .440 Bailey territorial focus to safeguard their major industries from the competitive effects of uneven global and European emissions targets and the ‘spatial infidelity’ of corporations and investment markets. Canada. and to connect. Geoff Wilson and the anonymous referees for their insightful comments on earlier versions. provides few guarantees that commitments will be honoured if these are seen to threaten states’ territorially-defined interests. In addition. national and non-state actors. pp. however. By exploring the EU ETS. Journal compilation © Royal Geographical Society (with The Institute of British Geographers) 2007 . ‘globalization is not a homogeneous or homogenizing process . 356). this study has sought to contribute to. Joint Implementation and the Clean Development Mechanism. 39 No. the story is far from one of simple dialectics or state domination. 450. Admittedly. 4 JUSSCANNZ consists of developed-world states that are heavily reliant on fossil fuels (USA. but. and it does not develop evenly’ (2000. it does not emanate from. rather than shifts from one scalar regime to another’ (Mansfield 2005. The second is that unless greater policy attention is paid to finding ways to bridge this gap References Agnew J 2005 Sovereignty regimes: territoriality and state authority in contemporary world politics Annals of the Association of American Geographers 95 437–61 Area Vol. around. two key policy messages emerge from the study. Claims to territorial emissions ‘entitlements’ never lurked far beneath the surface of negotiations but their temporary suspension made it possible for the Commission to lay the foundations of a binding climate regime. nor is it initiated from. 431–442. Traditional hierarchies remain important to these dynamics. Switzerland. All remaining errors and misinterpretations are my own. reflects complex and fluctuating scalar orientations and contested power relations. tensions between regime and state interests are neither new nor unique to neoliberalism. including solving political problems by reaching political accommodation. The first is that state acceptance of the principle of collective climate governance. and many of the political dynamics of the EU ETS bear a distinct resemblance to impenitent neorealism. Norway. state and regime orientations will be managed as emissions trading unfolds. My sincere thanks also go to Jon Shaw.

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