The existence of some 2 billion unused EU Allowances (EUAs) at the end of Phase II of the EU's Emissions Trading System (EU ETS) has sparked considerable debate about structural shortcomings of the EU ETS. At the same time, there has been a surprising lack of interest in one possible explanation...

This paper provides an introduction to the EU’s Emissions Trading System. As such it provides a discussion of the historical and legal context in which the EU ETS developed and now operates, a presentation of the key performance indicators for the first eight years through the end of the...