The present article describes the main insights deriving from the papers collected in this special issue which jointly provide a ‘room with a view’ on some of the most relevant issues in climate policy such as: the role of uncertainty, the distributional implications of climate change, the drivers and applications of decarbonizing innovation, the role of emissions trading and its interactions with companion policies. While looking at different issues and from different angles, all papers share a similar attention to policy aspects and implications, especially in developing countries. This is particularly important to evaluate whether and to what extent the climate policies adopted thus far in developed countries can be replicated in emerging economies.

This paper analyses the role that companion policies have had in the reduction of emissions regulated by the EU Emissions Trading System (EU ETS) and the related policy interactions, with a view to identifying relevant insights for China's forthcoming Emissions Trading System (ETS). The investigation rests on: (a) the observation of the EU's and China's ETSs and policy mixes; (b) economic theory concerning companion policies and ETS design; and (c) empirical ex-post evidence from the EU ETS. Three main conclusions emerge from the analysis. First, China's ETS, while not imposing a fixed cap on emissions, will not be immune to waterbed effects of companion policies. Second, the European experience stresses the importance of making explicit the objectives pursued by companion policies, and of balancing policies for innovation and policies for adoption of low-carbon technologies. Third, in the presence of a major market surplus, only permanent adjustments to allowance supply can be effective in raising prices.

Carbon pricing has been the most prominent climate change mitigation policy for the EU since the launch of its emissions trading system (ETS) in 2005. Since then, the context of international climate policy as well as of the socio-political and economical context of decarbonisation has changed considerably. The 2015 Paris Agreement engages virtually every country unlike its predecessor, while non-carbon pricing policies have led to rapid cost reductions in renewables, even if other sectors (particularly in energy-intensive industry) have not seen similar developments. This paper examines how the role of carbon pricing in the EU climate policy mix has evolved from its beginnings as a means to help achieve modest targets under the Kyoto Protocol, to a policy instrument increasingly augmented by a wider policy mix aimed at reaching no net emissions of greenhouse gases by mid-century.

This article assesses current and proposed European Union (EU) climate and environmental law, and the legal instruments associated with the Common Agricultural Policy (CAP), to see whether soil carbon sequestration is sufficiently promoted as a promising example of ‘climate-smart agriculture’. The assessment shows that current and proposed policies and instruments are inadequate to stimulate large-scale adoption of soil carbon projects across Europe. Given the identified structural flaws, it is likely that this is true for all climate-smart agricultural practices. An alternative approach needs to be developed. Under EU climate policy, agriculture should be included in the EU Emissions Trading System (ETS) by allowing regulated industries to buy offsets from the agricultural sector, following the examples set by Australia and others. The second element of a new approach is aimed at the CAP, which needs to be far more focused on the specific requirements of climate change mitigation and adaptation. Yet, such stronger focus does not take away the need to explore new income streams for farmers from offsets under the ETS, as the CAP will never have sufficient funds for the deep and full transition of Europe’s agriculture sector that is needed.

Over the past three decades or so, emissions trading has evolved from an idea that was little more than an academic curiosity to its current role as the centerpiece of the U.S. program to control acid rain and international programs to control greenhouse gases. This essay identifies some of the key milestones of this evolution, describes how that evolution was shaped by economic analysis, elicits some of the lessons about the design and effectiveness of emissions trading that have emerged from analysis of that evolution, and points out a few of the barriers that lie in the path of achieving a truly global carbon market.

Using cross-sector and cross-country data, this paper evidences that rent seeking influenced the allocation of CO2 emission permits in the two first phases of the European emissions trading scheme. Industry lobbies effectively used the 'job loss' and 'competitiveness' arguments, as unemployment proxy variables significantly impacted the allocation in both phases, and carbon intensity influenced it in the second phase. The countries that adopted a partial auction scheme also gave relatively more permits and in particular to the politically more powerful sectors. This suggests a compensation mechanism and supports the assumption of a political tradeoff between the quantity of permits issued and the decision between free grant and auction. It also confirms that the initial allocation is not neutral in the presence of special interest lobbying.

A crucial question for international law is how to allocate regulatory jurisdiction over transboundary problems between sovereign states. Insufficient clarity can trigger disputes such as that regarding the legality of the EU Directive that extends its ETS to all flights taking off from or landing at an EU airport, including those by non-EU carriers. This article uses this dispute as the vehicle to examine sovereignty in an increasingly interdependent world. It argues that a state’s decisional inviolability is central to sovereignty. Decisional sovereignty allows a state to regulate actors or activities with a link to its territory when these affect the state’s domestic affairs, rather than leaving the state at the mercy of an actor’s home state or of other states from the territory of which the problem emerges. Moreover, allocation of regulatory jurisdiction in conformity with decisional sovereignty reduces the incentives to free-ride on other states’ regulatory efforts and incentivizes international cooperation.

As international negotiations struggle to deliver timely, binding commitments to reduce greenhouse gas emissions to safe levels, the environmental legal community has begun to contemplate the scope for climate governance ‘beyond’ the international climate change regime. Many see merit in a more decentralized, disaggregated approach, operating across multiple governance levels. This article examines the development of climate change law in an era of multi-level governance. It analyzes several case studies of current manifestations of multi-level governance in climate change law, including the fragmented global emissions trading system, developing arrangements governing forests and land-based sinks, the growth of climate litigation establishing transnational liability principles, efforts to ensure adaptation to unavoidable climate change, and the emergence in federal systems of a decentralized approach to climate change regulation. The article concludes by considering whether the emerging multi-level system of climate governance is adequate to meet broader international goals of climate change mitigation and adaptation.

This article describes the challenges of using the constrained tools of international law to negotiate a sustainable framework to address climate change. It sets out to show how the particularities of the problem have led to creative and innovative solutions expanding the borders of international law. To this end, the article discusses carbon market mechanisms, the compliance regime of the Kyoto Protocol, and the emerging framework to create incentives to reduce land-based emissions in developing countries. These examples illustrate that the recognition of the role of sub-national and private entities in mitigating climate change has had significant impact on the rules of the climate regime. But the article also asserts that the un process, while recognizing the role of private actors, is still inadequately equipped to involve non-state actors in a meaningful way. The climate regime therefore challenges the traditional thinking about interstate relationships. No longer solely a matter for international environmental law, contemporary environmental governance has become a global affair, which makes the lens of transnational law a useful tool to think about these issues in practice in a more intellectually fruitful and relevant way. This article thereby provides a snapshot of the type of issues and discussion that readers of this journal can look forward to in the years to come.

This article examines the question of whether international markets in allowances conferring the right to emit greenhouse gases are consistent with a cosmopolitan approach to global and intergenerational justice. After placing emissions trading within the context of both climate change policy and cosmopolitan political theory, three normative objections are examined to the use of emissions trading to mitigate the threat of dangerous climate change. Each objection arises from a different application of cosmopolitan thinking: (i) the potentially corrosive impact of greater use of emissions allowances markets on the environmental values of successive generations of atmospheric users; (ii) the awkward relationship between emissions markets and the norms of procedural justice endorsed by all prominent cosmopolitans; and (iii) the injustice expressed by policy instruments that commodify the atmosphere. It is argued that, while each objection should prompt some care in the construction and implementation of emissions trading schemes to guarantee their legitimacy among existing and future users of the atmosphere, they do not generate a decisive normative challenge to the use of markets, properly defined and regulated, to slow global warming.

As emissions trading regimes become increasingly popular mechanisms for environmental pollution control around the world, environmentalists are asking whether market-based programmes meet their promise of both efficient and equitable pollution reductions. The emissions trading regime of the USA's Acid Rain Programme (ARP) is investigated in order to determine whether the programme has concentrated sulphur dioxide (SO2) pollution disproportionately for the poor and people of colour. While the USA emissions trading regime has been hailed as a success for cost-efficiently reducing pollution in the aggregate, critics contend that the programme is insufficiently attentive to the localized concentrations of harmful SO2 that trading can create. Further, advocates of environmental justice question whether emissions trading might exacerbate the disproportionate pollution burdens already facing the poor and people of colour. Stack emissions and pollution allowance holdings for all 110 power plants participating in Phase I of the trading programme are correlated with income and racial demographic characteristics of the people living around each plant to determine whether the ARP might raise distributive environmental justice concerns. Using USA Census data at the tract level, income and racial demographics around plants that increased and decreased their emissions as well as plants that were net purchasers and sellers of pollution allowances over the first three years of the programme are compared. For the first few years of the ARP, the emissions trading regime does not appear to have been concentrating SO2 pollution disproportionately for the poor and racial minority populations.