The state of carbon finance in Europe: a 'SWOT' analysis of the EU's Emissions Trading Scheme

As Phase III of the European Union's Emissions Trading Scheme (EU ETS) will begin in January 2012 when airlines operating flights to or from Europe will have to buy carbon permits to help offset their emissions under EU legislation, carbon finance and trading in Europe is set to proceed to a new horizon. Launched in January 2005, EU ETS is one of the established multilateral measures in the broader climate deals which are tackling the vertiginous growth of carbon emissions in the region on its way to attain its '20-20-20' targets. Illustrating the background of and the relevant operational aspects of the EU ETS, this article will investigate the efficacy, potential problems, business opportunities and uncertainties of the ETS by taking a SWOT analysis. It will lead to a discussion on the system's usefulness in mitigating the 'common' problem of climate change.