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The Impossible Transplant of the EU Emissions Trading Scheme: The Challenge of Energy Market Regulation

Published online by Cambridge University Press:  07 June 2016

Anatole Boute
Anatole Boute*
Affiliation:
The Chinese University of Hong Kong (CUHK), Faculty of Law, Hong Kong. Email: anatole.boute@cuhk.edu.hk.
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Abstract

Following the European Union (EU) experience, an increasing number of countries are establishing an Emissions Trading Scheme (ETS). The EU ETS often serves as a ‘model’ despite fundamental differences in the receiving environment. In the EU liberalized energy markets, carbon prices are intended to raise the cost of carbon-intensive energy and thereby stimulate cleaner alternatives. In contrast, many emerging economies continue to regulate energy investments and prices, which may insulate consumers and producers from the impact of an ETS. To avoid this risk, energy economists advocate EU-style energy market reforms as a prerequisite to the introduction of the ETS concept abroad. By focusing on the cases of China, Kazakhstan, and Russia, this article highlights the limits on the exportation of the EU liberalization model and argues that, instead of energy reform, the ETS must be reconceptualized as a mechanism that integrates the regulated energy market paradigm in emerging economies.

Keywords

Carbon tradingLegal transplantEnergy lawEmerging economies
Type
Articles
Information
Transnational Environmental Law , Volume 6 , Issue 1 , March 2017 , pp. 59 - 85
Copyright
© Cambridge University Press 2016 

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Footnotes

The author is grateful to the participants of the workshop entitled ‘“Learning by Doing” in Global Carbon Markets’, at the University of Edinburgh, School of Law, Edinburgh (United Kingdom), on 12 June 2015, for very useful comments on the preliminary conclusions of this article. Many thanks also to Huizhen Chen, Oleg Arkhipkin, Yan Xu, Yuan Xu, Navraj Ghaleigh, Liz Fisher, Sanja Bogojević, William Partlett, Frank Joshua, and Alexey Sankovski for most inspiring discussions on ETSs in emerging economies, to three anonymous TEL reviewers for their thorough comments, and to Meng Fang and Anna Harrisevans for research assistance. I would also like to thank David Wilmshurst, Academic Editor at CUHK, for editing the submission. The research underlying this article benefited from financial support by the CUHK Direct Research Grant. All views expressed in this article and any remaining errors are attributable solely to the author. The title of this article was inspired by Pierre Legrand’s seminal article on ‘The Impossibility of “Legal Transplants”’ (1997) 4(1) Maastricht Journal of European and Comparative Law, pp. 111–24.

References

1 European Commission, ‘Questions and Answers on the Revised EU Emissions Trading System’, MEMO/08/796, 17 Dec. 2008, available at: http://europa.eu/rapid/press-release_MEMO-08-796_en.htm. See also Morgera, E., Kulovesi, K. & Muñoz, M., ‘Environmental Integration and Multi-Faceted International Dimensions of EU Law: Unpacking the EU’s 2009 Climate and Energy Package’ (2011) 48(3) Common Market Law Review, pp. 829–891 Google Scholar, at 862–3.

2 Wurzel, R. & Connelly, J., ‘Conclusion’, in R. Wurzel & J. Connelly (eds), The European Union as a Leader in International Climate Change Politics (Routledge, 2011), pp. 271–289 Google Scholar, at 271.

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4 UN Framework Convention on Climate Change (UNFCCC) Secretariat, ‘Synthesis Report on the Aggregate Effect of the Intended Nationally Determined Contributions’, UN Doc. FCCC/CP/2015/7, 30 Oct. 2015, p. 33, available at: http://unfccc.int/resource/docs/2015/cop21/eng/07.pdf. Most notably, see National Development and Reform Commission (NDRC) of the People’s Republic of China (PRC), ‘Enhanced Actions on Climate Change: China’s Intended Nationally Determined Contributions (2015)’, available at: http://www4.unfccc.int/submissions/INDC/Published%20Documents/China/1/China’s%20INDC%20-%20on%2030%20June%202015.pdf.

5 See, e.g., Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety of Germany, ‘Emissions Trading: Basic Principles and Experiences in Europe and Germany’, Aug. 2014, p. 1, available at: http://ets-china.org/wp-content/uploads/2015/07/ets_basic_principles_and_experiences_in_europe_and_germany_eng_online.pdf.

6 On EU influence on China’s ETS policy, see, e.g., Chen, H., ‘Towards a Market-Based Climate Regime in China? A Legal Perspective on the Design and Implementation of GHG Trading’, PhD thesis, University of Maastricht (the Netherlands), Sept. 2015, p. 219 Google Scholar; Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), ‘Capacity Building for the Establishment of Emissions Trading Schemes in China’, available at: http://ets-china.org; EU Commission, Climate Action, ‘International Carbon Market’, available at: http://ec.europa.eu/clima/policies/ets/linking/index_en.htm; European Council, ‘EU-China Joint Statement on Climate Change’, 29 June 2015, available at: http://www.consilium.europa.eu/en/press/press-releases/2015/06/29-eu-china-climate-statement; G. Yu & R. Elsworth, ‘Turning the Tanker: China’s Changing Economic Imperatives and Its Tentative Look to Emissions Trading’, Sandbag Climate Campaign, Apr. 2012, p. 15, available at: https://sandbag.org.uk/site_media/pdfs/reports/Sandbag_Turning_the_Tanker_Final.pdf; A. Marcu, ‘China’s ETS: A Vote of Confidence in Carbon Markets Ahead of Paris’, Centre for European Policy Studies, 10 Oct. 2015, available at: http://www.ceps.eu/system/files/Vote%20of%20Confidence%20for%20CMs.pdf.

7 NDRC, ‘Interim Measures for Carbon Emissions Trading’, NDRC Paper, 10 Dec. 2014, available at: http://qhs.ndrc.gov.cn/gzdt/201412/t20141212_652035.html; NDRC, ‘China’s Policies and Actions on Climate Change’, NDRC Paper, Nov. 2014, p. 37–8, available at: http://en.ccchina.gov.cn/archiver/ccchinaen/UpFile/Files/Default/20141126133727751798.pdf; Duan, M., ‘From Carbon Emissions Trading Pilots to National System: The Road Map for China’ (2015) 9(3) Climate & Carbon Law Review, pp. 231–242 Google Scholar.

8 Order of the Ministry of the Environment of Kazakhstan of 11 May 2012 No. 151-p on the Adoption of Rules for the Trade in GHG Allowances, art 17. In February 2016, under pressure from the electricity industry, a proposal was introduced to terminate the Kazakh ETS: Skiban, O., ‘Kazakhstan Priostanovit do 2018 g. Torgovliu Kvotami na Vybrosy Parnikovykh Gazov’, Zakon, 24 Feb. 2016, available at: http://www.zakon.kz/4776924-kazakhstan-priostanovit-do-2018-g.html Google Scholar.

9 Musagazhinovoy, A., ‘EU ETS Training Program for the Private Sector in Kazakhstan’, Regional Environmental Center for Central Asia (CAREC), 2011, available at: http://www.old.carecnet.org/2011/08/04/eu-ets-training-program-for-the-private-sector-in-kazakhstan/?lang=en Google Scholar; Environmental Defense Fund (EDF), CDC Climat Research & IETA, ‘Kazakhstan ETS Case Study’, 2014, available at: https://ieta.memberclicks.net/assets/CaseStudy2015/kazakhstan_case_study_may2015.pdf; Sabitova, S., ‘EU ETS Framework for Establishing a Domestic Emissions Trading System in Kazakhstan’ (2011) 2(2) Journal of Environmental Investing, pp. 32–52 Google Scholar.

10 See, e.g., Jotzo, F. & Loeschel, A., ‘Emissions Trading in China: Emerging Experiences and International Lessons’ (2014) 75 Energy Policy, pp. 3–8 Google Scholar, at 4. For more references on the EU-centred approach to the reform of ETSs and energy markets abroad, see the literature review in Section 5 below.

11 Montgomery, D., ‘Markets in Licenses and Efficient Pollution Control Programs’ (1972) 5(3) Journal of Economic Theory, pp. 395–418 Google Scholar.

12 Weishaar, S., Emissions Trading Design: A Critical Overview (Edward Elgar, 2014), p. 4 CrossRefGoogle Scholar.

13 See Section 3 below on the EU approach to the ETS in the context of the liberalization of the EU energy markets.

14 Gullì, F., ‘Modelling the Short-Run Impact of “Carbon Trading” on the Electricity Sector’, in F. Gullì (ed.), Markets for Carbon and Power Pricing in Europe: Theoretical Issues and Empirical Analyses (Edward Elgar, 2008), pp. 36–79 Google Scholar.

15 See Section 4 below.

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17 The World Bank, ‘CO2 Emissions (Metric Tons per capita) (2011–2015)’, available at: http://data.worldbank.org/indicator/EN.ATM.CO2E.PC.

18 On the ‘socialist legal family’ see, e.g., Zweigert, K. & Kötz, H., An Introduction to Comparative Law, 2nd edn (Clarendon Press, 1977), p. 297 Google Scholar; Glenn, P., Legal Traditions of the World: Sustainable Diversity in Law, 5th edn (Oxford University Press, 2014), p. 347 Google Scholar.

19 See Section 5 below.

20 Russia referred to carbon pricing in its 2020 Energy Strategy (Government Regulation No. 1234-r of 28 Aug. 2003, replaced by Regulation No. 1715-r of 13 Nov. 2009) and in 2014 continued to explore the possibility of developing a national ETS: M. Carr & Nicola, S., ‘Russia Considers Domestic Carbon Market in Global Warming Fight’, Bloomberg Business, 12 Mar. 2014, available at: http://www.bloomberg.com/news/articles/2014-03-12/russia-considers-domestic-carbon-market-in-global-warming-fight Google Scholar.

21 On resistance to and the failure of energy market reform initiatives, see Section 5 below. In addition to these common characteristics, China, Kazakhstan, and Russia have important differences that could potentially affect the functioning of an ETS (e.g., economic growth; industrialization; resource-importing versus -exporting economies); however, these macroeconomic differences do not affect the sector-specific conclusions of this article on the electricity regulation challenge to the introduction of an ETS in emerging economies.

22 On the notion of legal transplant see, e.g., Watson, A., Legal Transplants: An Approach to Comparative Law (Scottish Academic Press, 1974), p. 96 Google Scholar; Legrand, P., ‘European Legal Systems Are Not Converging’ (1996) 45(1) International and Comparative Law Quarterly, pp. 52–81 Google Scholar.

23 See, e.g., Wiener, J., ‘Something Borrowed for Something Blue: Legal Transplants and the Evolution of Global Environmental Law’ (2001) 27(4) Ecology Law Quarterly, pp. 1295–1371 Google Scholar, at 1295; Yang, T. & Percival, R., ‘The Emergence of Global Environmental Law’ (2009) 36(3) Ecology Law Quarterly, pp. 615–664 Google Scholar, at 616; Yang, T., ‘The Emerging Practice of Global Environmental Law’ (2012) 1(1) Transnational Environmental Law, pp. 53–65 Google Scholar.

24 Heyvaert, V. & Etty, T.F.M., ‘Introducing Transnational Environmental Law’ (2012) 1(1) Transnational Environmental Law, pp. 1–11 Google Scholar, at 4.

25 See Watson, n. 22 above, on the one hand, and Legrand, n. 22 above, on the other.

26 Yang & Percival, n. 23 above, p. 664.

27 Dudek, D., Stewart, R. & Wiener, J., ‘Environmental Policy for Eastern Europe: Technology-based Versus Market-based Approaches’ (1992) 17(1) Columbia Journal of Environmental Law, pp. 1–52 Google Scholar.

28 Bodansky, D. et al., ‘Facilitating Linkage of Climate Policies through the Paris Outcome’ (2015) Climate Policy, pp. 1–17 Google Scholar, at 13.

29 Bogojević, S., Emissions Trading Schemes: Markets, States and Law (Hart, 2013), p. 68 Google Scholar.

30 Ibid., p. 164.

31 Teubner, G., ‘Legal Irritants: Good Faith in British Law or How Unifying Law Ends up in New Divergences’ (1998) 61(1) The Modern Law Review, pp. 11–32 Google Scholar, at 12. Teubner recognizes that rules can be copied by other jurisdictions but that these foreign rules will be ‘reconstructed’ within the new social and legal environment, resulting in a different meaning to the original rules.

32 See, e.g., Gunningham, N., ‘Confronting the Challenge of Energy Governance’ (2012) 1(1) Transnational Environmental Law, pp. 119–135 CrossRefGoogle Scholar, at 119.

33 See, e.g., Gullì, n. 14 above, p. 36.

34 See, e.g., Fowlie, M., ‘Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement’ (2010) 100(3) American Economic Review, pp. 837–869 Google Scholar, at 840.

35 Nelken, D., ‘Comparatists and Transferability’, in P. Legrand & R. Munda (eds), Comparative Legal Studies: Traditions and Transitions (Cambridge University Press, 2003), pp. 437–466 Google Scholar, at 437.

36 See, e.g., Keppler, J. Horst, ‘Annex: The Interaction between the EU ETS and European Electricity Markets’, in D. Ellerman, F. Convery & C. de Perthuis (eds), Pricing Carbon: The European Union Emissions Trading Scheme (Cambridge University Press, 2010), pp. 293–328 Google Scholar.

37 Kim, Y.-G. & Lim, J.-S., ‘An Emissions Trading Scheme Design for Power Industries Facing Price Regulation’ (2014) 75 Energy Policy, pp. 84–90 CrossRefGoogle Scholar; Hood, C., Managing Interactions between Carbon Pricing and Existing Energy Policies (International Energy Agency (IEA), 2013)Google Scholar; Sijm, J., Chen, Y. & Hobbs, B., ‘The Impact of Power Market Structure on CO2 Cost Pass-Through to Electricity Prices under Quantity Competition’ (2012) 34(4) Energy Economics, pp. 1143–1152 CrossRefGoogle Scholar.

38 On the importance of interdisciplinary research for energy and climate law, see Redgwell, C. et al., ‘Introduction’, in M. Roggenkamp et al. (eds), Energy Law in Europe (Oxford University Press, 2016), pp. 3–9 Google Scholar; Ghaleigh, N., ‘Economics and International Climate Change Law’, in C. Carlarne, K. Gray & R. Tarasofsky (eds), The Oxford Handbook of International Climate Change Law (Oxford University Press, 2016), pp. 73–97 Google Scholar, at 74. More generally, on the importance of interdisciplinarity for comparative law research, see Legrand, P., ‘How to Compare Now’ (1996) 16(2) Legal Studies, pp. 232–242 Google Scholar, at 232.

39 See, e.g., Teubner, n. 31 above, p. 19; Chen-Wishart, M., ‘Legal Transplant and Undue Influence: Lost in Translation or a Working Misunderstanding?’ (2013) 62(1) International & Comparative Law Quarterly, pp. 1–30 Google Scholar, at 28.

40 See, e.g., Pistor, K., ‘The Standardization of Law and Its Effect on Developing Economies’, UN Conference on Trade and Development, G-24 Discussion Paper Series, No. 4, June 2000, p. 5 Google Scholar, available at: http://unctad.org/en/Docs/pogdsmdpbg24d4.en.pdf; Berkowitz, D., Pistor, K. & Richard, J.F., ‘Economic Development, Legality and the Transplant Effect’ (2003) 47(1) European Economic Review, pp. 165–195 Google Scholar, at 165.

41 On the benefits of the comparative law methodology in the field of climate law, see Mehling, M., ‘The Comparative Law of Climate Change: A Research Agenda’ (2015) 24(3) Review of European, Comparative & International Environmental Law, pp. 341–352 Google Scholar.

42 See, e.g., Jotzo & Loeschel, n. 10 above, pp. 3–4, and the literature review in Section 5 below.

43 See Section 5 below.

44 Chen-Wishart, n. 39 above, p. 28.

45 See, e.g., Jotzo & Loeschel, n. 10 above, pp. 3–4.

46 Although there is a clear risk that governmental intervention will also affect the formulation of carbon prices in the ETS (see, e.g., Lo, A., ‘Challenges to the Development of Carbon Markets in China’ (2015) 16(1) Climate Policy, pp. 109–124 Google Scholar, at 109), the focus of this article remains limited to the energy law challenges to the transplantation of the ETS.

47 Mattei, U., ‘Efficiency in Legal Transplants: An Essay in Comparative Law and Economics’ (1994) 14(1) International Review of Law and Economics, pp. 3–19 Google Scholar.

48 On the functional method in comparative law, see, e.g., Michaels, R., ‘The Functional Method of Comparative Law’, in M. Reimann & R. Zimmermann (eds), The Oxford Handbook of Comparative Law (Oxford University Press, 2006), pp. 340–380 Google Scholar.

49 Laing, T. et al., ‘Assessing the Effectiveness of the EU Emissions Trading Scheme’, Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment, Jan. 2013, available at: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/02/WP106-effectiveness-eu-emissions-trading-system.pdf Google Scholar; Ghaleigh, n. 38 above, p. 83; Kirat, D. & Ahamada, I., ‘The Impact of the European Union Emission Trading Scheme on the Electricity-Generation Sector’ (2011) 33(5) Energy Economics, pp. 995–1003 Google Scholar.

50 For an in-depth analysis, see Ellerman, Convery & de Perthuis, n. 36 above; Weishaar, n. 12 above.

51 European Commission, ‘Impact Assessment Accompanying the Proposal for a Decision Concerning the Establishment and Operation of a Market Stability Reserve for the Union GHG Emission Trading Scheme and Amending Directive 2003/87/EC’ COM(2014) 20 final (Commission Staff Working Paper), p. 5.

52 See, e.g., Wråke, M. et al., ‘What Have We Learnt from the European Union’s Emissions Trading Scheme?’ (2012) 41(1) AMBIO, pp. 12–22 Google Scholar; Laing, T. & Grubb, M., ‘Low Carbon Electricity Investment: The Limitations of Traditional Approaches and a Radical Alternative’, Cambridge University Energy Policy Research Group (EPRG), Sept. 2010, p. 15, available at: http://www.eprg.group.cam.ac.uk/wp-content/uploads/2010/09/Binder12.pdf Google Scholar.

53 Directive 2003/87/EC establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community and Amending Council Directive 96/61/EC [2003] OJ L 275/32, Art 1.

54 European Commission, ‘Proposal for a Directive Amending Directive 2003/87/EC so as to Improve and Extend the Greenhouse Gas Emission Allowance Trading System of the Community’ COM(2008) 16 final, p. 3.

55 Decision (EU) 2015/1814 concerning the Establishment and Operation of a Market Stability Reserve for the Union Greenhouse Gas Emission Trading Scheme and Amending Directive 2003/87/EC [2015] OJ L 264/1.

56 European Commission, n. 51 above.

57 Lo, A. & Howes, M., ‘Power and Carbon Sovereignty in a Non-Traditional Capitalist State: Discourses of Carbon Trading in China’ (2015) 15(1) Global Environmental Politics, pp. 60–82 Google Scholar, at 65.

58 State Council of the People’s Republic of China (PRC), The Twelfth Five-Year Plan for National Economic and Social Development (MoraQuest LLC Central Compilation and Translation Press, 2011)Google Scholar.

59 State Council of the PRC, ‘Proposal on Formulating the 13th Five-Year Plan (2016–2020) on National Economic and Social Development’, available at: http://news.xinhuanet.com/fortune/2015-11/03/c_1117027676.htm; State Council of the PRC, ‘The 13th Five-Year Plan for National Economic and Social Development’,17 Mar. 2016, available at: http://www.gov.cn/xinwen/2016-03/17/content_5054992.htm (in Chinese).

60 However, see NDRC, ‘Market Readiness Proposal (MRP): Establishing a National Emissions Trading Scheme in China’, Feb. 2013, available at: https://www.thepmr.org/system/files/documents/China_MRP_final_19-02-2013rev_0.pdf (briefly referring to long-term low-carbon investments). On ETS objectives in China, see, e.g., W. Shu & D. Maosheng, ‘Design of China’s National Emissions Trading Scheme’, presentation at ‘Tackling Climate Change: Pricing Carbon to Achieve Greenhouse Gas Mitigation’, 13 Mar. 2013, The World Bank, available at: https://www.thepmr.org/system/files/documents/China-ETS%20presentation.pdf; C. Sun, ‘China’s Macro Policy of Controlling GHG Emissions’, Partnership for Market Readiness (PMR), 2012, available at: https://www.thepmr.org/country/china-0.

61 On the negative impact that short trading (and allocation) periods had on energy investments in the EU, see European Commission, ‘Communication on Building a Global Carbon Market’ COM(2006) 676 final, p. 8.

62 Carr & Nicola, n. 20 above.

63 Decree of the Government of Kazakhstan on the Concept of Development of the Energy Complex by 2030, No. 724, 28 June 2014.

64 Ibid.

65 Directive 2003/87/EC, n. 53 above, Art. 1.

66 Montgomery, n. 11 above, p. 395. See also Coggins, J. & Smith, V., ‘Some Welfare Effects of Emission Allowance Trading in a Twice-Regulated Industry’ (1993) 25(3) Journal of Environmental Economics and Management, pp. 275–297 Google Scholar.

67 See, e.g., M. Baritaud, ‘Securing Power during the Transition: Generation Investment and Operation Issues in Electricity Markets with Low-Carbon Policies, IEA, Insights Series, 2012, available at: http://www.iea.org/publications/insights/insightpublications/SecuringPowerTransition_Secondeedition_WEB.pdf. See also Joskow, P., ‘Lessons Learned from Electricity-Market Liberalization’ (2008) 29(2) The Energy Journal, pp. 9–42 Google Scholar; Spence, D., ‘Can Law Manage Competitive Energy Markets’ (2008) 93(4) Cornell Law Review, pp. 765–817 Google Scholar.

68 Deregulation in the context of energy market reforms does not necessarily mean less regulation. In relation to the liberalization of energy supply it generally requires the development of more complex regulatory architecture: see Mäntysaari, P., EU Electricity Trade Law: The Legal Tools of Electricity Producers in the Internal Electricity Market (Springer, 2015), p. 93 Google Scholar.

69 See, e.g., Baritaud, n. 67 above.

70 See, e.g., Boute, A., Russian Electricity and Energy Investment Law (Brill, 2015), p. 696 CrossRefGoogle Scholar. On ‘hybrid’ or ‘dual’ electricity markets (i.e., markets that ‘combine elements of a state-centered and a market-centered electric power system’), see Victor, D. & Heller, T., ‘Major Conclusions’, in D. Victor & C. Heller (eds), The Political Economy of Power Sector Reform: The Experiences of Five Major Developing Countries (Cambridge University Press, 2007) pp. 254–306 Google Scholar, at 260.

71 On the principles of EU energy law, see, e.g., Johnston, A. & Block, G., EU Energy Law (Oxford University Press, 2012)Google Scholar; Talus, K., EU Energy Law and Policy: A Critical Account (Oxford University Press, 2013)Google Scholar. It must be noted that network-related activities remain subject to central command-and-control.

72 Recital 8 of Directive 2009/72/EC concerning Common Rules for the Internal Market in Electricity and Repealing Directive 2003/54/EC [2009] OJ L 211/55 (EU Internal Electricity Market Directive). See also Directive 2009/73/EC concerning Common Rules for the Internal Market in Natural Gas and Repealing Directive 2003/55/EC [2009] OJ L 211/94.

73 Case C-265/08, Federutility and Others v. Autorità per l’energia elettrica e il gas [2010] ECR I-03377. See also Case C-242/10, Enel Produzione SpA v. Autorità per l’energia elettrica e il gas, Judgment, 21 Dec. 2011, ECLI:EU:C:2011:861.

74 Federutility, ibid., para. 35; Enel Produzione SpA, ibid., para. 70.

75 European Commission, ‘Proposal for a Directive Establishing a Scheme for Greenhouse Gas Emission Allowance Trading’ COM(2001) 581 final, [2002] OJ C 75E/33.

76 European Commission, n. 54 above, pp. 3, 13.

77 More generally, see Ellerman, Convery & de Perthuis, n. 36 above.

78 Kim & Lim, n. 37 above, p. 85 (referring to the carbon cost pass-through rate as ‘the barometer for the efficiency of market mechanisms’).

79 Sijm, J., Neuhoff, K. & Chen, Y, ‘CO2 Cost Pass Through and Windfall Profits in the Power Sector’ (2006) 6(1) Climate Policy, pp. 49–72 Google Scholar; Sijm, Chen & Hobbs, n. 37 above.

80 European Commission, ‘Communication on Delivering the Internal Electricity Market and Making the Most of Public Intervention’ COM(2013) 7243 final, p. 6; European Regulators Group for Electricity and Gas (ERGEG), ‘Status Review of End-User Price Regulation as of 1 January 2010’, E10-CEM-34-03, 8 Sept. 2010, available at: http://www.energy-regulators.eu/portal/page/portal/EER_HOME/EER_PUBLICATIONS/CEER_PAPERS/Customers/Tab1/E10-CEM-34-03_price%20regulation_8-Sept-2010.pdf.

81 See Laing et al., n. 49 above; Ellerman, D. & Joskow, P., The European Union’s Emissions Trading System in Perspective (Pew Center on Global Climate Change, 2008), pp. 24–29 Google Scholar; European Commission, ‘Guidance for the Design of Renewables Support Schemes’ SWD(2013) 439 final, p. 14.

82 European Commission, ‘Making the Internal Energy Market Work’ COM(2012) 663 final, pp. 12–3.

83 Laing et al., n. 49 above.

84 EU Internal Electricity Market Directive, n. 72 above, Art. 15.

85 European Commission, n. 80 above, p. 7.

86 Ibid., p. 9.

87 European Commission, ‘Renewable Energy: A Major Player in the European Energy Market’ COM(2012) 271 final, p. 4.

88 European Commission, ‘Proposal for a Directive concerning Measures to Safeguard Security of Electricity Supply and Infrastructure Investment’ COM(2003) 740 final, p. 4.

89 EU Internal Electricity Market Directive, n. 72 above, Recital 6.

90 European Commission, Commission Staff Working Document accompanying the Document ‘Renewable Energy: A Major Player in the European Energy Market’, SWD(2012) 164 final.

91 Decision (EU) 2015/1814, n. 55 above. For a critical analysis of this reform, see, e.g., Richstein, J., Chappin, E. & de Vries, L., ‘The Market (In-)Stability Reserve for EU Carbon Emission Trading: Why It May Fail and How to Improve It’ (2015) 35 Utilities Policy, pp. 1–18 Google Scholar.

92 European Commission, n. 80 above, p. 15.

93 See, most recently, State Council of the PRC, ‘Deepening Power Sector Reform’, Doc. No. 9, 15 Mar. 2015, available at: http://www.ne21.com/news/show-64828.html. For a criticism, see Dupuy, M. & Weston, F., ‘A New Framework for China’s Power Sector, The Regulatory Assistance Project’, Regulatory Assistance Project (RAP), 23 Mar. 2015, available at: http://www.raponline.org/featured-work/a-new-framework-for-chinas-power-sector Google Scholar.

94 State Council of the PRC, ‘Promoting the Reform of Pricing Mechanisms’, 12 Oct. 2015, available at: http://www.gov.cn/xinwen/2015-10/15/content_2947548.htm; NDRC, ‘Implementation Opinions on the Promotion of Electricity Market Development’, 30 Nov. 2015, available at: http://www.ndrc.gov.cn/zcfb/zcfbtz/201511/W020151130295800083469.pdf. See also Xiying, L. & Lingcheng, K., ‘A New Chapter in China’s Electricity Market Reform’, Energy Studies Institute, 21 Mar. 2016, available at: http://esi.nus.edu.sg/docs/default-source/esi-policy-briefs/a-new-chapter-in-china-s-electricity-market-reform.pdf Google Scholar.

95 Mehta, A., Rao, S. & Terway, A., ‘Power Sector Reform in Central Asia: Observations on the Diverse Experiences of Some Formerly Soviet Republics and Mongolia’ (2007) 15(2) Journal of Cleaner Production, pp. 218–234 Google Scholar, at 218–9; Boute, A., Towards Secure and Sustainable Energy Supply in Central Asia: Electricity Market Reform and Investment Protection (Energy Charter Secretariat, 2015)Google Scholar; Boute, n. 70 above.

96 Boute, n. 70 above, p. 360.

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99 Bohi & Burtraw, n. 97 above, p. 149.

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101 Bohi & Burtraw, n. 97 above, p. 149.

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104 Zhang, ibid., pp. 218–19.

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110 Baron et al., n. 108 above, p. 40.

111 The free allocation of allowances will be adopted in the first phases of China’s national ETS: NDRC, ‘Interim Measures for the Management of Voluntary GHG Emission Reduction Transaction’, available at: http://cdm.ccchina.gov.cn/WebSite/CDM/UpFile/File2894.pdf.

112 Kim & Lim, n. 37 above, p. 85; B. Lanz & S. Rausch, ‘Emissions Trading in the Presence of Price-Regulated Polluting Firms: How Costly Are Free Allowances’, Graduate Institute Geneva & Centre for International Environmental Studies, Research Paper 34, Jan. 2015, p. 33, available at: http://graduateinstitute.ch/files/live/sites/iheid/files/sites/cies/shared/Research%20Papers%20&%20Publications/Research%20Papers/2015/CIES_WP34-1.pdf.

113 Baron et al., n. 108 above, p. 49.

114 State Council of the PRC, n. 94 above, Items 18 and 26.

115 Decree of the Kazakh Government on the Approval of Tariff Limits, 25 Mar. 2009, No. 392; Decree of the Kazakh Ministry of Energy on the Approval of Rules for the Approval of Tariff Limits for Electricity and Availability, 27 Feb. 2015, No. 147.

116 Boute, n. 95 above, p. 39.

117 Decree of the Russian Government on the Procedure for the State Regulation of Electricity, with Subsequent Amendments’, 14 Nov. 2009, No. 929, SZRF (23 Nov. 2009), No. 47, Item 5667.

118 Ibid. See also Boute, n. 70 above, p. 314.

119 See, e.g., ‘Mosenergo Trims Investment after Regulator Caps Prices’, The Moscow Times, 19 Jan. 2009, available at: http://www.themoscowtimes.com/sitemap/free/2009/1/article/mosenergo-trims-investment-after-regulator-caps-prices/373651.html; ‘Reactions to the Project of Order of the Federal Anti-Monopoly Service on the Approval of the Requirements of Economic Justification of Price Bids for the Sale of Electricity’, 11 Feb. 2013, available at: http://www.fas.gov.ru/legislative-acts/legislative-acts_51086.html.

120 Electricity Law of the Russian Federation, 26 Mar. 2003, No. 35-FZ, SZRF (2003), No. 13, Item 1177, Art. 20.

121 Kazakh Law on Natural Monopolies, 9 July 1998, No. 272-I, Art. 15-1.

122 PRC Electricity Law, 28 Dec. 1995, Art. 36; Ma, n. 102 above, p. 2635; Gao, C. & Li, Y., ‘Evolution of China’s Power Dispatch Principle and the New Energy Saving Power Dispatch Policy’ (2010) 38 Energy Policy, pp. 7346–7357 Google Scholar, at 7347; Zhang, Y.-F., ‘The Regulatory Framework and Sustainable Development of China’s Electricity Sector’ (2015) 222 The China Quarterly, pp. 475–498 Google Scholar, at 487.

123 Russian Constitutional Court, Judgment, 29 Mar. 2011, No. 2-P.

124 See, e.g., Decree of the Kazakh Government on the Provision of Dispatching Services, 23 Mar. 2013, No. 300.

125 D. Cooke, Russian Electricity Reform 2013 Update (IEA, 2013), p. 36; Boute, n. 70 above, p. 292.

126 Kahrl, F., Williams, J. & Hu, J., ‘The Political Economy of Electricity Dispatch Reform in China’ (2013) 53 Energy Policy, pp. 361–369 Google Scholar, at 362.

127 State Council of the PRC, ‘Grid Dispatch Regulation 2011’, 8 Jan. 2011, available at: http://www.gov.cn/gongbao/content/2011/content_1860843.htm. See Baron et al., n. 108 above, pp. 9, 23; Gao & Li, n. 122 above; Kahrl, Williams & Hu, ibid., p. 361; Teng, Wang & Zhiqiang, n. 107 above, p. 42; M. Dupuy et al., ‘Low-Carbon Power Sector Regulation: Options for China’, RAP Report for the World Bank, Feb. 2015, pp. 24–7.

128 NDRC, ‘China’s Policies and Actions for Addressing Climate Change 2013’, 5 Nov. 2013, available at: http://en.ndrc.gov.cn/newsrelease/201311/P020131108611533042884.pdf.

129 Kahrl, Williams & Hu, n. 126 above, pp. 367, 369; Gao & Li, n. 122 above, p. 7350.

130 The White House, Office of the Press Secretary, ‘U.S.-China Joint Presidential Statement on Climate Change’, 25 Sept. 2015, available at: https://www.whitehouse.gov/the-press-office/2015/09/25/us-china-joint-presidential-statement-climate-change; Dupuy, M., ‘Obama-Xi Joint Presidential Statement on Climate Change Promises Much-Needed Reform of Generator Dispatch in China’, RAP, 25 Sept. 2015, available at: http://www.raponline.org/featured-work/obama-xi-joint-presidential-statement-on-climate-change-promises-much-needed-reform-of-generator-dispatch-in Google Scholar.

131 NDRC, ‘Implementation Opinions on the Liberalization of Electricity Dispatch’, 30 Nov. 2015, available at: http://www.ndrc.gov.cn/zcfb/zcfbtz/201511/W020151130295800116751.pdf. See also Xuan, W. & Kahrl, F., ‘Lower Emissions, Costs Possible with Two-Part Pricing and Dispatch Reform in China’, RAP, 1 Apr. 2016, available at: http://www.raponline.org/featured-work/lower-emissions-costs-possible-with-two-part-pricing-and-dispatch-reform-in Google Scholar.

132 Xu, Y., Yang, C.-J. & Xuan, X., ‘Engineering and Optimization Approaches to Enhance the Thermal Efficiency of Coal Electricity Generation in China’ (2013) 60 Energy Policy, pp. 356–363 Google Scholar.

133 State Council of the PRC, ‘Decision on Reform of the Investment System’, 16 July 2004, available at: http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan036724.pdf; Guelff, C. & Adkins, L., Emissions Trading in the People’s Republic of China: A Simulation for the Power Sector (IEA, 2014), p. 12 Google Scholar.

134 State Council of the PRC, ibid.; Baron et al., n. 108 above, p. 7.

135 Cooke, n. 125 above; Boute, n. 70 above, pp. 293–313; Boute, n. 95 above, p. 35.

136 On electricity planning in China, see M. Dupuy et al., n. 127 above, p. 12. On electricity planning in Russia, see Boute, n. 70 above, pp. 293–314. On electricity planning in Kazakhstan, see Chikanayev, S., ‘Investing in Kazakhstan’s Power Industry: The Legal Framework’ (2014)Google Scholar Investor’s Voice, pp. 18–21, at 18, available at: http://www.gratanet.com/uploads/user_14/files/Investing_in_Kazakhstan_s_power_industry_the__legal_framework.pdf.

137 See, e.g., Munnings et al., n 109 above, p. 11.

138 Koch, N. et al., ‘Causes of the EU ETS Price Drop: Recession, CDM, Renewable Policies or a Bit of Everything? New Evidence’ (2014) 73 Energy Policy, pp. 676–685 Google Scholar.

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140 NDRC, ‘China’s Policies and Actions on Climate Change’, NDRC Policy Paper, Nov. 2014, p. 5, available at: http://en.ccchina.gov.cn/archiver/ccchinaen/UpFile/Files/Default/20141126133727751798.pdf. See, more generally, Gilley, B., ‘Authoritarian Environmentalism and China’s Response to Climate Change’ (2012) 21(2) Environmental Politics, pp. 287–307 Google Scholar.

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142 Chernenko, N., ‘Carbon Pricing on the Russian Electricity Market’, University of Cambridge Electricity Policy Research Group, 10 Nov. 2012, available at: http://www.eprg.group.cam.ac.uk/carbon-pricing-on-the-russian-electricity-market-2 Google Scholar.

143 Jotzo & Loeschel, n. 10 above, pp. 3–4.

144 Teng, Wang & Zhiqiang, n. 107 above.

145 Fan, J. et al., ‘Carbon Pricing and Electricity Market Reforms in China’ (2014) 16(5) Clean Technologies and Environmental Policy, pp. 921–933 Google Scholar.

146 F. Kahrl et al., ‘Challenges to China’s Transition to a Low-Carbon Electricity System’ (2011) 39 Energy Policy, pp. 4032–4041 Google Scholar.

147 Lo, n. 46 above.

148 European Commission, ‘The Development of Energy Policy for the Enlarged European Union, Its Neighbours and Partner Countries’ COM(2003) 262 final, pp. 14–7.

149 On the high social importance of energy law in general, see Bradbrook, A., ‘Energy Law as an Academic Discipline’ (1996) 14(2) Journal of Energy & Natural Resources Law, pp. 193–217 Google Scholar, at 206; Redgwell et al., n. 38 above.

150 See, however, Watson, n. 22 above, p. 96 (arguing, based on a positivist approach to law, that legal transplants are ‘extremely common’ and ‘socially easy’ because ‘legal rules are not peculiarly designed for the society in which they operate).

151 Teubner, n. 31 above, p. 19.

152 Chen-Wishart, n. 39 above, p. 28.

153 Lenin, V., Doklad VIII S’ezda Sovetov Gosudarstvennoi Komissii po elektrifikatsii Rossii (1920)Google Scholar, quoted in Bushuev, V. (ed.), Energetika Rossii 1920–2020. Tom 1 Plan GOELRO (Energiia, 2006), p. 5 Google Scholar.

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156 von Hirschhausen, C. & Opitz, P., ‘Power Utility Re-Regulation in East European and CIS Transformation Countries (1990–1999): An Institutional Interpretation’, 246 Discussion Papers of DIW Berlin German Institute for Economic Research, 2001, p. 8 Google Scholar.

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159 Ma, n. 102 above, p. 2644. On earlier, largely unsuccessful, reform attempts, see, e.g., Zeng, M. et al., ‘The Power Industry Reform in China 2015: Policies, Evaluations and Solutions’ (2016) 57 Renewable & Sustainable Energy Reviews, pp. 94–110 Google Scholar; Yao, L. & Chang, Y., ‘Shaping China’s Energy Security: The Impact of Domestic Reforms’ (2015) 77 Energy Policy, pp. 131–139 Google Scholar; Andrews-Speed, P., ‘Reform Postponed: The Evolution of China’s Electricity Markets’, in F. Sioshansi (ed.), Evolution of Global Electricity Markets (Elsevier, 2013), pp. 531–570 CrossRefGoogle Scholar.

160 Prime, ‘Murmansk Region Energy Minister Fired after Putin’s Criticism’, News Daily, 26 Feb. 2013, p. 14.

161 Decree of the Russian Government on the Procedure for the State Regulation of Electricity, with Subsequent Amendments, n. 117 above.

162 Boute, n. 95 above. The social sensitivity of electricity pricing in the Central Asian region was highlighted in 2010, when the decision of the Kyrgyz government to increase prices triggered the Second Kyrgyz Revolution. See, e.g., D. Wood, ‘Electricity Plays Key Role in Kyrgyzstan Uprising’, World Resources Institute, 19 Apr. 2010, available at: http://www.wri.org/blog/2010/04/electricity-plays-key-role-kyrgyzstan-uprising.

163 Chen-Wishart, n. 39 above, p. 28.

164 Lewis, J., Green Innovation in China (Columbia University Press, 2013), p. 11 Google Scholar.

165 On the benefits of this approach, see Kim & Lim, n. 37 above, p. 89.

166 Munnings et al., n. 109 above, p. 35; Qi, S., Wang, B. & Zhang, J., ‘Policy Design of the Hubei ETS Pilot in China’ (2014) 75 Energy Policy, pp. 31–38 Google Scholar, at 32; Jiang, J.J., Ye, B. & Ma, X.M., ‘The Construction of Shenzhen’s Carbon Emission Trading Scheme’ (2014) 75 Energy Policy, pp. 17–21 Google Scholar, at 19.

167 Teng, Wang & Zhiqiang, n. 107 above, p. 44. The dual direct and indirect carbon cap is limited in scope, with variations among the pilot ETSs. Large industrial players (e.g. iron and steel, cement, chemical industry) submit allowances for their direct emissions only.

168 Ibid.

169 European Commission, n. 61 above; Stern, N., The Economics of Climate Change: The Stern Review (Cambridge University Press, 2006), p. 325 Google Scholar.

170 Rose, K., ‘Electric Industry Restructuring and the SO2 Emissions Trading Program’, in R. Kosobud (ed.), Emissions Trading: Environmental Policy’s New Approach (Wiley, 2000), pp. 209–215 Google Scholar.

171 Fowlie, n. 34 above, p. 837.

172 Ibid., p. 863. In China, Russia, and Kazakhstan, the ‘rate of return’ stability is, to a certain extent, affected by the sensitivity of energy pricing and the risk of public interference with investments.

173 UNFCCC Secretariat, n. 4 above; NDRC, n. 4 above.

174 See, e.g., Federal Ministry for the Environment of Germany, n. 5 above, p. 1; Chen, n. 6 above, p. 219; GIZ, n. 6 above; Sabitova, n. 9 above, p. 32; Musagazhinovoy, n. 9 above; EDF, n. 9 above.

175 N. 3 above.

176 Boute, A., ‘Toward an EU-Russian Energy Agreement: Principles of Liberalization under EU and Russian Energy Law’ (2015) 40(2) Review of Central and East European Law, pp. 109–141 Google Scholar.

177 See, e.g., Ma, n. 102 above, p. 2644; von Hirschhausen & Opitz, n. 156 above, p. 8.

178 Chen-Wishart, n. 39 above, p. 28.

179 See, e.g., Jotzo & Loeschel, n. 10 above, pp. 3–4; Teng, Wang & Zhiqiang, n. 107 above, p. 39; Kahrl et al., n. 146 above, p. 4032; Fan et al., n 145 above, p. 921.

180 Pistor, n. 40 above, p. 5.

181 See, e.g., Jotzo & Loeschel, n. 10 above, pp. 3–4; Kahrl et al., n. 146 above, p. 4032; Teng, Wang & Zhiqiang, n. 107 above, p. 39.

182 Shaffer, G., ‘Transnational Legal Process and State Change: Opportunities and Constraints’ (2012) University of Minnesota Law School Legal Studies Research Paper Series, p. 40 Google Scholar, available at: http://www.iilj.org/publications/2010-4.Shaffer.asp.

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