Description
This paper starts with a recapitulation of how emissions trading became a cornerstone of the European Union’s climate
policy. While a whole bouquet of reasons can be identified the major reasons why the EU Commission decided to pursue
the establishment of an emissions trading scheme within the EU are: (1) the integration of international emissions trading
into the Kyoto Protocol; (2) the failure of the 6th Conference of the Parties to the United Nations Framework Convention
on Climate Change (UNFCCC) and the withdrawal of the United States from the Kyoto Protocol negotiations; and (3) the
unsuccessful attempt to introduce an EU-wide CO2-tax
The evolution of emissions trading in the European Union –
The role of policy networks, knowledge and policy entrepreneurs
Marcel Braun
Rupprecht Consult, Forschung & Beratung GmbH, Hatzfeldstrasse 6, 51069 Ko¨ ln, Germany
Abstract
This paper starts with a recapitulation of how emissions trading became a cornerstone of the European Union’s climate
policy. While a whole bouquet of reasons can be identi?ed the major reasons why the EU Commission decided to pursue
the establishment of an emissions trading scheme within the EU are: (1) the integration of international emissions trading
into the Kyoto Protocol; (2) the failure of the 6th Conference of the Parties to the United Nations Framework Convention
on Climate Change (UNFCCC) and the withdrawal of the United States from the Kyoto Protocol negotiations; and (3) the
unsuccessful attempt to introduce an EU-wide CO
2
-tax. Other reasons were the fact that emissions trading did not need
unanimity in the European Council like the CO
2
-tax; the economic e?ciency of emissions trading which appealed not only
to the Commission but also to industry and Member States; the danger of a fragmented carbon market as the United King-
dom and Denmark had already set up domestic emissions trading schemes that were incompatible; the incentive a Euro-
pean emissions trading scheme would be for the formation of a global carbon market; and the possibility to in?uence
investment strategies of power companies towards a sustainable modernisation of the EU’s power generation
infrastructure.
Drawing upon these preconditions, this paper analyses the development of the European Union Emissions Trading
Scheme (EU ETS). Based on the fact that the EU is embedded in a multi-level policy-making architecture which encour-
ages the emergence of policy networks it is argued that the EU ETS has been shaped by an (informal) issue-speci?c policy
network established by some sta? members from DG Environment, including individuals knowledgeable on emissions
trading – such as experts from consultancies, environmental NGOs and the business sector. It is argued that within this
European policy network on emissions trading the European Emissions Trading Directive – as adopted on 13 October
2003 – has been negotiated and developed. It is concluded that the sharing of knowledge about this relatively new and
largely unknown regulatory instrument and about design options for a potential European emissions trading scheme
was the key momentum for the establishment and continuity of this policy network and that the ability of managing
knowledge generation processes was the main factor to allow for a few sta? members from DG Environment to play a
dominant role as policy entrepreneurs in developing the European Emissions Trading Directive, even beyond their formal
role of proposing the scheme as representatives from the EU Commission.
Ó 2008 Elsevier Ltd. All rights reserved.
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doi:10.1016/j.aos.2008.06.002
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Available online at www.sciencedirect.com
Accounting, Organizations and Society 34 (2009) 469–487
www.elsevier.com/locate/aos
Introduction
When in 1968 Canadian economist John H.
Dales published his book Pollution Property and
Prices (Dales, 1968), he might not have guessed
the importance of his idea of emissions trading for
today’s climate policy. But since then, his idea has
come a long way and the trading of greenhouse
gas emissions has become a key policy instrument
to tackle the problem of global climate change. On
a global level, emissions trading between govern-
ments has been established as one of three ?exible
mechanisms in the framework of the Kyoto Proto-
col. On the national level, many industrialised coun-
tries – rati?ers as well as non-rati?ers of the Kyoto
Protocol – have either introduced or are considering
company-based emissions trading systems (cf. Schu¨ le
& Sterk, 2008; Sterk, Braun, Haug, Korytarova, &
Scholten, 2006). And on the supranational level,
the European Union established today’s largest
company-based greenhouse gas emissions trading
scheme operating since January 2005. It encom-
passes about 11,500 installations from all its Mem-
ber States, responsible for around a third of the
EU’s greenhouse gas emissions, and roughly 45%
of the EU’s CO
2
emissions (Vis, 2006, p. 48).
In order to reach the Community’s emissions
reduction commitment of minus 8% compared to
1990 agreed to in the Kyoto Protocol the European
Commission proposed the establishment of a Euro-
pean Union Emissions Trading Scheme (EU ETS)
in the framework of its Post-Kyoto Strategy in June
1998 (European Commission, 1998). The proposal
was followed by a Green Paper in March 2000
(European Commission, 2000), a draft directive of
the European Commission in October 2001 (Euro-
pean Commission, 2001a), and a binding EU frame-
work directive – the European Emissions Trading
Directive – on 13 October 2003 (European Commis-
sion, 2003a). After having been implemented by all
EU Member States, the EU ETS ?nally went into
e?ect on 1 January 2005 encompassing CO
2
emis-
sions from combustion plants, oil re?neries, coke
ovens, iron and steel plants, and factories making
cement, glass, lime, brick, ceramics, pulp and paper.
By now emissions trading has developed into one of
the EU’s major instruments to combat climate
change and both, the European Commission and
the European Council have stated that they regard
the EU ETS as an ‘‘essential instrument for achiev-
ing the medium- and long-term emission reductions
that are necessary to stabilise greenhouse gas con-
centrations in the atmosphere” (European Commis-
sion, 2006, p. 2).
How does emissions trading work?
While emissions trading schemes di?er from each
other regarding the participants they cover – coun-
tries under the Kyoto Protocol; companies or users
of industrial installations in the EU or any domestic
scheme – the principle of the cap-and-trade market
mechanism is the same. Participants are allocated a
certain quantity of emission allowances in accor-
dance with their historical emissions less a speci?ed
reduction commitment. Each emission allowance
entitles the party in question to emit one tonne of
carbon dioxide (or one tonne of CO
2
equivalent as
in the Kyoto Protocol) within a speci?ed period.
At the end of this obligation period, the party must
demonstrate that the extent of its emissions are cov-
ered by its emission allowances. Governments or
companies may acquire additional emission allow-
ances either by purchasing them from other market
participants or by carrying over any remaining
credit from one obligation period to the next. Those
which emit more than their allowance have to make
up the shortfall by acquiring the necessary allow-
ances from other market participants.
Emissions trading gives market participants the
?exibility to ful?l their reduction commitment either
by their own e?orts or through the purchase of
additional reduction certi?cates, but in the latter
case, since there is a ?xed number of emission allow-
ances within the system, other market participants
have to achieve a correspondingly greater reduction.
In terms of economic theory, emission allowance
trading ensures that reductions are achieved where
one tonne of carbon dioxide can be avoided most
cost-e?ectively – assuming a ‘perfect market’ and
‘complete information’. Emissions trading therefore
minimizes the total cost to the economy of all avoid-
ance measures.
The economic implications of emissions trading
From an economic point of view the establish-
ment of an emissions trading scheme involves a
major e?ort at shifting the ‘‘calculation mechanism”
of market economies by putting a price on green-
house gas emissions, and thus ‘‘internalising” the
externality that they involve (MacKenzie, 2008).
This means that emitting greenhouse gases becomes
part of economic calculations as a direct or as an
470 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
opportunity cost. By allocating or selling emissions
allowances the state – or another regulatory body –
hustles companies into including the external costs
of environmental damages caused by greenhouse
gas emissions into their investment and costing plan-
ning in the same way as other production factors
which, in turn, led to the establishment of a vibrant
new market with di?erent actors providing a wide
range of carbon-related ?nancial services (Runge-
Metzger, 2006, p. 271f). Incidentally, the fact that
emissions trading is making apparent the value of
the scarce common resource of a clean environment
(Vis, 2006, p. 47) and the economic implications of a
price signal for ?rms’ strategic decisions and risk
management strategies is being regarded by the EU
Commission as one of the instrument’s major
strengths and has therefore been one of the reasons
why the Commission decided to pursue the develop-
ment of a European trading scheme (see ‘‘The devel-
opment of emissions trading into a cornerstone of
the European Union’s climate policy”).
Furthermore, the creation of a carbon market has
implications for accounting issues (for a detailed dis-
cussion, see MacKenzie, 2009) and accountants are
still struggling to ?nd a standard treatment of allow-
ances as there currently is no guidance issued by an
authorised body such as the International Account-
ing Standards Board (IASB) and a draft for a poten-
tial mandatory accounting guideline from its
International Reporting Interpretations Committee
– IFRIC 3, Emission Rights – has led to public out-
cry resulting in the proposal being withdrawn (Casa-
mento, 2005; Cook, 2009). While many accounting
issues arising from emissions trading schemes remain
unsolved the IASB put the issue back on the table as
there is a risk of diverse accounting practices which
might impair the comparability and usefulness of
?nancial statement information. Currently, the
IASB is focussing on ?ve key questions, e.g., regard-
ing the nature of allowances – are they assets or not;
should they be treated as a license to emit or as a
form of emission currency – and their liability
(IASB, 2008). While the IASB is still discussing these
questions, accounting and ?nancial regulation issues
remain to be treated di?erently by companies cov-
ered by the EU ETS with companies’ accounting
frameworks being governed either by the EU’s
Accounting Regulatory Committee (Regulation
1606/2002/EC), by the International Accounting
Standards adopted by the EU Commission (Regula-
tion 1864/2005/EC) or by Member States’ domestic
legislation (Upston-Hooper et al., 2006, p. 13).
Outline and methodology
While the main concern of this paper is the anal-
ysis of the evolution of the European emissions
trading scheme, it is ?rst being explained in ‘‘The
development of emissions trading into a cornerstone
of the European Union’s climate policy” how and
why emissions trading developed into a cornerstone
of the EU’s climate policy. After outlining the theo-
retical considerations (‘‘Multi-level governance, pol-
icy networks, and the role of knowledge” ), Section
‘‘The development of the European emissions trad-
ing directive within a European policy network on
emissions trading” recapitulates the policy-making
process that led to the EU ETS: How has the Euro-
pean Emissions Trading Directive been developed?
Who were dominant actors and which were the gen-
eral conditions for these actors to be able to take up
a key role in the policy-making process? The paper’s
central hypothesis is that the sharing of knowledge
about emissions trading and design options for
emissions trading schemes was the key momentum
for the establishment and continuity of an issue-spe-
ci?c policy network and that the ability of managing
knowledge generation processes was the main factor
to allow for a few sta? members from DG Environ-
ment to play a dominant role as policy entrepre-
neurs in developing the emissions trading directive,
even beyond their formal role of proposing the
scheme as representatives from the EU
Commission.
To arrive at this conclusion 19 interviews have
been conducted with policy-makers and stakehold-
ers that have either been involved in the making
of the European Emissions Trading Directive or
have been close observers of the policy-making pro-
cess. Other sources of interpretative data are docu-
ments such as legislative documents or position
papers from companies, business associations and
NGOs. All this empirical material is then being ana-
lysed on the basis of a theoretical framework that
takes into account the relevance of policy networks
within multi-level systems, the role of knowledge in
policy processes as well as the role of policy
entrepreneurs.
The development of emissions trading into a
cornerstone of the European Union’s climate policy
A whole bouquet of reasons can be identi?ed
why the European Union pursued the development
of the EU ETS in the ?rst place. One of the main
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 471
in?uences on the EU’s discussion about a common
climate policy strategy and the role that emissions
trading might take is to be found in the interna-
tional climate negotiations, speci?cally in the inte-
gration of international emissions trading into the
Kyoto Protocol. In the early 1990s, several interna-
tional and supranational organisations have set the
agenda for greenhouse gas emissions trading. The
most important actors were the Organisation for
Economic Cooperation and Development (OECD)
which published a study investigating US experi-
ences with sulphur dioxide emissions trading and
considering the scope for an emissions trading sys-
tem at international level (Michaelowa, 2000, p.
27), the United Nations Conference on Trade and
Development (UNCTAD) which established a
Greenhouse Gas Emissions Trading Project and
published several studies within its framework
(e.g., UNCTAD, 1992), the US-based NGO Envi-
ronmental Defense which came out in support of
emissions trading in the early 1990s, and in 1991
published a study that advocated emissions trading
as a way of protecting the rainforest (cf. Dudek &
LeBlanc, 1991), and the International Energy
Agency (IEA) which together with the OECD pro-
vided the framework for the Annex-I Expert Group
in the talks leading up to the United Nations
Framework Convention on Climate Change
(UNFCCC) – the group which, in the course of
the international negotiations, developed into the
most important forum for the elaboration of an
emissions trading system (Oberthu¨ r & Ott, 1999,
p. 245).
Backed by the support of these organisations, the
United States demanded that emissions trading
should be integrated into the Kyoto Protocol as
one of three ?exible mechanisms. In late 1996, the
US began seriously to back the idea of emissions
trading. Other countries in the so-called JUSSC-
ANNZ Group
1
lined up behind the American posi-
tions (cf. Agrawala & Andresen, 2002, p. 48). The
EU countries, for their part, rejected emissions trad-
ing until the 3rd Conference of the Parties to the
United Nations Conference on Climate Change
(UNFCCC) in Kyoto, as they feared that Europe-
ans would regard emission certi?cates as a ‘right
to pollute’ or as ‘trading in indulgences’, that trad-
ing in this new and complex instrument would prove
impossible within the speci?ed time period, and that
the US had introduced the proposal in order to
delay the negotiations (see Grubb, Vrolijk, & Brack,
1999, p. 92). The developing countries, organised as
G77 + China, also rejected the proposal. But, since
Washington made its agreement to the Kyoto Pro-
tocol dependent on acceptance of emissions trading,
the EU Commission ?rst tied its consent to emis-
sions trading to international agreement on the level
of reduction commitments, then ?nally accepted it
on condition that it would take place ‘supplemen-
tary’ to domestic policies and measures (Grubb
et al., 1999, p. 94). In 1999, the European Council
had substantialised the EU’s claim for ‘supplemen-
tarity’ by agreeing that a maximum of 50% of
national obligations should be met through the
deployment of ?exible mechanisms (Torvanger,
2001, p. 2), and the EU had called for a correspond-
ing reduction of international emissions trading
(UNFCCC, 1998, p. 3). Hence in November 2000,
when Dutch minister Jan Pronk, the chairman of
the negotiations, tabled a ‘soft’ compromise at the
?rst part of the 6th Conference of the Parties in
The Hague calling for Annex-I countries to meet
their obligations ‘primarily’ through national mea-
sures (UNFCCC, 2000, p. 10), his proposal was
rejected by the EU.
Finally, in March 2001, newly-elected US Pres-
ident Bush jr. announced the United States’ with-
drawal from the Kyoto Protocol. This proved to
be one of the main factors for the alteration of
the EU’s position on emissions trading from rejec-
tion to support – together with the failure of the
?rst part of the 6th Conference of the Parties in
The Hague. The crisis in the international negoti-
ations proved to be an increasingly important dri-
ver of emissions trading within the European
Union. ‘‘These events united Europe and triggered
further interest in the establishment of an EU-
wide market in GHG permits” (Zapfel & Vainio,
2002, p. 12).
The US withdrawal from the Kyoto process left
the EU with virtually no leeway to strike a bargain
with other countries over their respective demands.
As the EU’s top priority was now to bring the talks
to some conclusion, even without the US, it could
not give de?nite shape to the supplementarity clause
but had to abandon its demand for an upper limit
on the use of emissions trading in favour of the leg-
ally weaker formulation that Annex-I countries
would meet their reduction obligations ‘chie?y’
through national measures (UNFCCC, 2001, p. 3).
1
Japan, the US, Switzerland, Canada, Norway, and New
Zealand.
472 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
But the acceptance of (the rather weak legal set-
up of) the instrument of emissions trading in the
framework of the Kyoto Protocol was not the only
catalyst why the EU started to seriously consider
emissions trading as a useful policy instrument
within its own climate policy mix. Another major
reason for emissions trading to become a corner-
stone of the European Union’s climate policy was
the failure to introduce an EU-wide CO
2
-tax.
In 1992 the EU Commission proposed the intro-
duction of such a Community-wide tax for the
reduction of CO
2
emissions. But the proposal failed
due to the unanimity within the Council of Finance
Ministers necessary concerning ?scal matters. And
it was not just several EU Member States that
opposed the proposal for a European carbon tax;
it was also undermined by intense lobbying from
the industry sector (Duwe, 2008; Wettestad, 2005,
p. 8). Likewise, a revised proposal from 1995 did
not come into e?ect, hampered in particular by Ger-
many insisting on such demanding tax rates that the
proposal had to fail just like the 1992 proposal. The
carbon tax that was ?nally introduced in 1997 on
the EU level was so much watered-down that its
impact was practically irrelevant (Santarius &
Braun, 2008).
Moreover, for emissions trading it was not neces-
sary to reach unanimity in the Council of Environ-
ment Ministers because as an environmental policy
measure emissions trading required only a quali?ed
majority based on Art. 175 (1) of the EU Treaty.
2
In
contrast to the ?scal policy instrument of a carbon
tax, emissions trading could not be blocked by a
single Member State. So even if some Member
Countries refused a consensus, danger of a ‘joint-
decision trap’ (Scharpf, 1985) – a blockade of a deci-
sion that needs to be taken by mutual agreement
among players at di?erent political levels within a
given multi-level policy system – was much weaker.
When it became evident for EU policy-makers
that they will not be able to get an EU-wide CO
2
-
tax adopted in the near future, the European Union
desperately needed to develop another policy instru-
ment which would enable the Union to reach the
reduction target of minus 8% compared to 1990 lev-
els in the period 2008 to 2012 as agreed to in Kyoto
– especially against the background that the EU
Commission was told by its legal service that it
could only ratify the Kyoto-Protocol if it also had
some levers for implementation (Wriglesworth,
2008). In this regard, the instrument of emissions
trading became increasingly appealing to the EU
Commission as emissions trading was economically
being regarded as the most cost-e?cient means to
reach emissions reductions. This ?t well to the Euro-
pean Union’s intention to increasingly take into
consideration ‘‘economic concepts such as the pol-
luter-pays principle and the requirement to carry
out an analysis of costs and bene?ts of environmen-
tal policies” (Delbeke, 2006: vii). Moreover, the eco-
nomic e?ciency of the instrument of emissions
trading was the major reason why the other Direc-
torates-General basically supported the introduc-
tion of a EU ETS (Ehrenberg, 2008).
Also, industry was much more open towards
emissions trading due to its ?exibility and cost-e?ec-
tiveness. As the instrument was generally supported
by a majority of European business and industry
groups (Hone, 2008; Kyte, 2008; Wriglesworth,
2008), their opposition against emissions trading
was not as intense compared to the lobbying e?orts
against an EU-wide CO
2
-tax. There even were ini-
tiatives pro emissions trading among the business
community. In order to draw EU policy maker’s
attention to emissions trading as an alternative to
a carbon tax, in 1999 for example, companies from
the United Kingdom initiated the formation of a
national ‘Emissions Trading Group’ to develop a
voluntary emissions trading scheme in Britain as
an alternative to tax proposals, endorsed and ?nan-
cially supported by the British government in 2002
(Kyte, 2008). And also in Denmark, a small
national emissions trading scheme had been estab-
lished in 1999, moderately supported by the targeted
power companies as the instrument would run easily
alongside competition (Pedersen, 2000). Likewise
although not successful, the Norwegian business
community proposed the establishment of a
national emissions trading scheme (Hoibye, 1999).
Furthermore, there were a few companies that had
already started to experiment internally with emis-
sions trading, among them BP and Shell (see ‘‘The
role of the business sector in the European policy
network on emissions trading”). Especially BP lob-
bied heavily for the instrument and was very impor-
2
While there has not been made any use of a majority voting
procedure – regarding emissions trading all decisions have been
made unanimously – it might still have served as a potential
menace in the background. Rather the EU Commission, precisely
its DG Environment, has been successful in preventing the use of
a majority voting due to its dominant role as a policy entrepre-
neur in the policy-making process as will be elucidated in Section
‘‘The development of the European emissions trading directive
within a European policy network on emissions trading”.
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 473
tant in setting the agenda for emissions trading, ?rst
for a domestic scheme in the UK and then also in
Brussels for an EU scheme (Wriglesworth, 2008).
While the above may be regarded as major rea-
sons there are several other factors that have con-
tributed to the European Commission’s decision to
pursue the establishment of an emissions trading
scheme within the EU:
DG Environment realised that from an economic
point of view emissions trading is equivalent to a
CO
2
-tax if the permits are fully auctioned. While
DG Environment knew that they would not be
able to get an EU ETS with auctioning right
from the start as industry and Member States
?ercely opposed auctioning they realised that
once the system was up and running they might
be able to introduce auctioning at a later state.
And in fact, this is what the EU-Commission is
striving for in its 2008 proposal for a revised
emissions trading directive (European Commis-
sion, 2008, p. 7f). In this sense, the Commission
anticipated early on that emissions trading with
free allocation at ?rst opens the door to a rather
opaque political feasibility (Boyd, 2008).
From an economic point of view again, DG
Environment regards the internalisation of exter-
nalities as one of the major strengths of the
instrument because emission permits have a
value. ‘‘What is so powerful about emissions
trading is that it ‘translates’ into ?nancial terms
the need to address a particular environmental
objective. In companies, this means that taking
the environment into account extends beyond
the remit of the Environment, Health and Safety
Manager, to the Financial Director, and into the
Boardroom itself, where the deployment of capi-
tal is tested also against the ?nancial conse-
quences and opportunities of environmental
constraints” (Vis, 2006, p. 46).
While the United Kingdom and Denmark had
already established domestic emissions trading
schemes which proved to be incompatible and
with some other EU Member States starting to
think about domestic schemes as well there was
a danger of a fragmented carbon market consist-
ing of many incompatible domestic schemes
(Convery, Ellerman, & de Perthuis, 2008, p. 8).
On the other hand, many Member States were
rather inactive as regards climate policy and
DG Environment realised that it can back all
these countries to work out a national climate
policy strategy as a necessary basis for each
Member State to prepare a National Allocation
Plan as required in the foreseen directive for an
EU ETS. In turn, the existence of national strat-
egies towards climate change was a precondition
for the EU Commission to be able to formulate
an overall EU climate policy strategy with targets
and timetables (Wriglesworth, 2008).
The EU ETS might serve as a major incentive to
the formation of a global carbon market (Ehren-
berg, 2008), not just due to its own size but more
so by opening the door to link the EU ETS to
other regional and national emissions trading
schemes (European Commission, 2003a, Article
25) and through linking the EU carbon market
to international projects by allowing companies
covered by the EU ETS to make use of credits
from the Kyoto-Protocol’s ?exible mechanisms
Joint Implementation and Clean Development
Mechanism as agreed to in the Linking Directive
(European Commission, 2003b).
Moreover, DG Environment realised that via the
instrument of emissions trading they would be
able to in?uence investment strategies of Euro-
pean power companies towards a sustainable
modernisation of the EU’s power generation
infrastructure. Seen from this angle emissions
trading is not just a climate policy instrument
that helps the EU to reach its reduction targets
but is also an instrument to in?uence energy pol-
icy and changes in the energy system, for example
regarding the future use of lignite and hard coal
(Forth, 2004).
Multi-level governance, policy networks, and the role
of knowledge
Following the recapitulation of how emissions
trading became one of the EU’s most important cli-
mate policy instruments, the analysis will now focus
on the development of the European Emissions
Trading Directive. Before though, a few preliminary
theoretical considerations need to be explained. The
starting point of the analysis is the concept of multi-
level governance which points to the fact – and the
reasons that led to the development of the EU ETS
elucidated above already gave some indications to
this – that modern policy-making, especially in the
European Union, is increasingly taking place within
a multi-level policy system. This multi-level gover-
nance system, in turn, promotes the emergence of
474 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
policy networks in which state and non-state actors
jointly negotiate and develop policies. The forma-
tion of such policy networks is based upon the
exchange of resources, and for the development of
the European Emissions Trading Directive the
resource of knowledge has been central.
Policy-making within a multi-level system
The concept of multi-level governance developed
from the lack of a theory or concept that could ade-
quately explain the integration process in the Euro-
pean Union and the alteration of the decision-
making processes this involves (Puchala, 1972, p.
276). In 1976, the increasing complexity of the
European policy process has been taken up from a
neo-functionalist perspective by Haas who intro-
duced the term ‘turbulence’ to not just explain
how the European Community is functioning but
also to re?ect the causes for the increasing co-oper-
ation and interaction between political actors from
di?erent levels:
‘‘Turbulence is the term we bestow on the con-
fused and clashing perceptions of organizational
actors which ?nd themselves in a setting of great
social complexity. The number of actors is very
large. Each pursues a variety of objectives which
are mutually incompatible; but each is also
unsure of the trade o?s between the objectives.
Each actor is tied into a network of interdepen-
dencies with other actors which are as confused
as the ?rst. Yet some of the objectives sought
by each cannot be obtained without co-operation
from the others. A turbulent ?eld, then, is a pol-
icy space in which this type of confusion domi-
nates discussion and negotiation. It can be
subnational, national, regional, inter-regional
and global – and all at the same time” (Haas,
1976, p. 179).
Behind the need for a political reconceptualisa-
tion of the European arena lays the basic assump-
tion that the EU is ‘‘a system of complex, multi-
tiered, geographically overlapping structures of
governmental and non-governmental elites” (Wes-
sels, 1997, p. 291). This view was strengthened by
the advance of the European integration process
following the Single Europe Act of 1987, which
for the ?rst time made it possible to reach agree-
ments by quali?ed majority voting and thereby
considerably expanded the room for political
action at EU level.
It took another ?ve years, until Gary Marks
(1992) introduced the concept of multi-level gover-
nance which he initially de?ned as ‘‘a system of con-
tinuous negotiation among nested governments at
several territorial tiers” (Marks, 1993, p. 392). Later
on, he and others stressed that both the individual
and the common room for action of national states
was limited not only by the constraints that other
states placed on their representatives within collec-
tive decision-making processes, but also by the fact
that they had to share their decision-making author-
ity with representatives of supranational, subnation-
al and non-governmental institutions (Marks,
Hooghe, & Blank, 1996, p. 371). This re?nement
of the de?nition makes clear that the concept of
multi-level governance is generally to be understood
as ‘‘the dispersion of central government authority
both vertically to actors located at other territorial
levels, and horizontally to non-state-actors” (Bache
& Flinders, 2004, p. 4).
In this re?ned conception, the institutional refer-
ence of multi-level governance is no longer a hierar-
chical territorial system limited to formal
institutions, but rather non-hierarchical, function-
ally oriented processes of interaction operating
within a certain context of problems and decisions
– processes which are constituted, and may at any
moment dissolve, through partnerships, networks
and agreements among public and private institu-
tions as well as individuals. For the interweaving
of di?erent levels and actors with one another is
not static but dynamic – and dependent upon the
respective policy ?eld. Multi-level governance thus
proves to be the exercise of authority irrespective
of the existence of formal structures of government;
it works itself out through complex negotiations
among actors at di?erent policy levels. The concept
highlights the fact that hierarchical political pat-
terns are increasingly replaced with governance in
interdependent policy networks, which involves a
multiplicity of actors without a central hierarchy.
Policy-making within policy networks
Policy-making in a multi-level system goes along
with the fact that policies are increasingly being
negotiated and developed within networks of state
and non-state actors from di?erent territorial levels.
Although implicitly applied in the concept of multi-
level governance it is policy network theory that
reveals the high relevance of (social) networks in
modern policy-making. Especially within the EU
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 475
such networks are more and more important due to
the supranational policy-making structure.
Similar to the concept of multi-level governance
the fundament of policy network theory is the
assumption that modern societies are increasingly
functionally di?erentiated due to their growing
complexity resulting in a loss of sovereignty of the
state to act and steer. Thus the state has to rely
increasingly on ‘soft’ steering mechanisms such as
bargaining, providing incentives, stimulating, mod-
erating and co-ordinating (Grande, 1993, p. 51).
Policy-making is increasingly being in?uenced by
public and private actors from all levels outside
the hierarchical control of governments. Against
this background, policy networks are de?ned as
‘‘webs of relatively stable and ongoing relationships
which mobilise and pool dispersed resources so that
collective (or parallel) action can be orchestrated
toward the solution of a common policy” (Kenis
& Schneider, 1991, p. 36). In this view, policy-mak-
ing is a process which involves a multitude of public
and private actors – be they individual or collective
– which join together in order to reach a collectively
binding agreement on a certain problem within a
certain policy ?eld in a predominantly informal
way and on a central, non-hierarchical level (Bo¨ rzel,
1997, p. 4). Policy network theory re?ects this alter-
ation of the relationship between the state and soci-
ety by being conceptualised as hybrid steering
mechanisms located in between the two conven-
tional forms of governance, hierarchy and market
(Scharpf, 1996).
In this respect, policy networks are a concept to
describe new forms of political steering or gover-
nance. Policy networks are conceived as a speci?c
form of interaction: non-hierarchical self-co-ordina-
tion (Knill, 2000, p. 117; Scharpf, 1996). On the one
hand, non-state actors strive to participate in the
policy-making process while such co-operation, on
the other hand, enables the state to gain access to
resources and expertise of private actors in order
to solve policy problems. Therefore, policy net-
works can typically be found in conjunction with
rather complex and resource- and knowledge-inten-
sive policy problems (e.g., climate change). Policy
networks are mechanisms to mobilise political
resources when capacities needed in the policy-mak-
ing process are distributed among many di?erent
public and private actors. ‘‘To sum up, in an
increasingly complex and dynamic environment,
where hierarchical co-ordination is rendered di?-
cult if not impossible and the potential for deregula-
tion is limited due to the problems of market failure
(. . .), governance becomes more and more only fea-
sible within policy networks, providing a framework
for the e?cient horizontal co-ordination of the
interests and actions of public and private corporate
actors, mutually dependent on their resources”
(Bo¨ rzel, 1997, p. 6).
Generally, policy networks might develop ad hoc
and relating to a certain policy issue (Schneider,
2004, p. 8). Such an (informal) issue-speci?c policy
network can also be identi?ed for the development
of the EU ETS, consisting of state actors, predom-
inantly from DG Environment of the European
Commission, and of non-state actors, such as
experts from consultancies, environmental NGOs,
individual companies and business associations. In
the framework of this European policy network
on emissions trading the European Emission Trad-
ing Directive has been largely discussed and
formulated.
Knowledge as a policy network’s key resource
‘‘Policy networks are mechanisms of political
resource mobilization in situations where the capac-
ity for decision-making, program formulation and
implementation is widely distributed or dispersed
among private and public actors” (Kenis & Schnei-
der, 1991, p. 41). A key momentum for the existence
of a policy network in this de?nition is the exchange
of resources and negotiations on the basis of these
resources. The centrality of resource dependencies
for the emergence and continued existence of policy
networks has been emphasised by many scholars,
among them for example Benson who de?ned policy
networks as ‘‘a cluster or complex of organizations
connected to each other by resource dependencies
and distinguished from other clusters or complexes
by breaks in the structure of resource dependencies”
(Benson, 1982, p. 148). According to Benson, policy
networks are patterns of relations between actors
created by interactions between interdependent
actors. These interdependencies constitute them-
selves and exist as long as an actor ‘‘cannot success-
fully complete a policy process that he himself has
activated without resources possessed by the other
actor(s)” (Klijn, 1996, p. 98).
As the state’s responsibilities are constantly
growing and are becoming more and more compli-
cated in a di?erentiated society, the state increas-
ingly needs to co-operate – at least informally –
with those non-state actors which possess these pol-
476 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
icy-relevant resources to accomplish its ever more
di?erentiating regulatory duties (Scharpf, 1992).
But resources are not just being exchanged within
network structures, they are also responsible for
the formation of a policy network. As the exchange
of resources is central within policy networks this
also implies that only those actors could become
part of a network which possess the respective
resources relevant for and of demand within the pol-
icy network.
The policy-relevant resources that are being
exchanged vary according to the respective policy
network; they could be ?nancial resources, person-
nel, technical installations, expert knowledge or
the like. Which resources are relevant within a pol-
icy network depends on the policy issue addressed in
the network. For the development of the European
Emissions Trading Directive, for example, the key
resource for the formation and continuity of the
policy network has been knowledge: knowledge
about emissions trading, knowledge about how it
works, technical knowledge about design features
of emissions trading schemes and about the poten-
tial (economic) implications of these, especially
knowledge gained from practical experiences with
emissions trading such as schemes that already
existed, e.g., the BP-internal scheme or the US sul-
phur trading scheme. It is argued below that those
individuals knowledgeable about emissions trading
provided a basis for the constitution of an (infor-
mal) issue-speci?c policy network in which the
European Emissions Trading Directive has been
developed.
The development of the European emissions trading
directive within a European policy network on
emissions trading
‘‘The European Commission alone has the for-
mal powers to initiate and draft legislation, which
includes the right to amend and withdraw its pro-
posal at any stage in the process, and it is the think
tank for new policies” (Marks & Hooghe, 2001, p.
12). Formally responsible for making policy propos-
als, the European Commission, more precisely DG
Environment, set the agenda for the EU ETS. In
June 1998 the Commission gave a strategy report
on EU climate policy to the European Parliament
and the Council of Ministers, in which it recom-
mended that an EU-wide emissions trading system
should be introduced for companies in 2005 in order
to be able to reach the Community’s reductions
commitments under the Kyoto Protocol (European
Commission, 1998). In May 1999 a second report
followed on Europe’s climate protection strategy,
in which the Commission announced a Green Paper
on emissions trading for the year 2000 (European
Commission, 1999, p. 15). Only with its publication
in March 2000 did public debate begin at the Euro-
pean level. Although some Member States, such as
Britain and Denmark, had already begun to discuss
or had implemented emissions trading systems of
their own, the in?uence of Member States at the
level of the EU had previously been extremely slight
(Vis, 2005, 2008). Thus, the Commission unreserv-
edly performed its role as think-tank for the Euro-
pean Union as DG Environment had anticipated
early on that Member States would need instru-
ments such as emissions trading to deliver on their
reduction targets agreed to in the Kyoto Protocol,
and it used not only its right to take initiatives but
also the ‘moral pressure’ of invoking these targets
and the EU’s demand that these should to a signif-
icant extent be achieved through domestic
measures.
However, when the European Union proposed
the development of an EU ETS in 1998, the mar-
ket-based climate policy instrument of emissions
trading was largely unknown and there was only lit-
tle experience available with the instrument. The
only large-scale emissions trading scheme to draw
conclusions from was the US sulphur dioxide cap-
and-trade programme, started in 1995. Neverthe-
less, as the EU’s greenhouse gas emissions trading
scheme was to be larger, more complex and was
to encompasses a variety of new features, the plans
of the European Commission were regarded as a
‘‘grand new policy experiment” (Kruger & Pizer,
2004). But also within DG Environment, responsi-
ble for designing the EU ETS within the EU Com-
mission, knowledge about emissions trading was
rather limited when some of its sta? members
started to think about proposing emissions trading
in Europe. Although, policy-makers from DG Envi-
ronment had started to be engaged in emissions
trading during the Kyoto negotiations they were
still in need to learn more about the instrument in
order to be able to design a European scheme –
especially after Ger Klaassen, who had studied the
US SO
2
trading scheme extensively (Klaassen,
1996), left the Commission in 1998 right when it
was decided to pursue the development of an EU
ETS. ‘‘Up and until Kyoto, ET [emissions trading]
was largely a territory little explored by the EU,
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 477
and knowledge was essentially limited to academic
circles and business that followed debates in the
USA” (Christiansen & Wettestad, 2003, p. 6).
It was the necessity for learning – the exchange of
knowledge – which was the point of origin for the
emergence of an (informal) policy network on emis-
sions trading as there were a number of people
knowledgeable on emissions trading outside DG
Environment. These individuals had either worked
on emissions trading theoretically or had gained
practical experiences with the instrument. On the
one hand, there were a number of scientists working
as consultants that had studied emissions trading
for some time – as well as some knowledgeable indi-
viduals from environmental NGOs – which played a
key role for designing the EU Emissions Trading
Directive (see Section ‘‘The role of consultancies
and environmental NGOs in the European policy
network on emissions trading”). On the other hand,
there were a number of companies that came for-
ward as supporters of emissions trading and there
were a few companies which were particularly
knowledgeable on the instrument – above all BP
who had already implemented an internal emissions
trading scheme (see Section ‘‘The role of the busi-
ness sector in the European policy network on emis-
sions trading”). On the basis of the European policy
network on emissions trading which emerged in the
framework of the learning processes between DG
Environment with experts from consultancies, envi-
ronmental NGOs and the business sector, sta?
members from DG Environment were able to take
up an important role as key players and acted as
policy entrepreneurs for the development of the
European Emissions Trading Directive (see Section
‘‘Policy entrepreneurs in the European policy net-
work on emissions trading”) – although the conduct
of negotiations after the proposal of a draft direc-
tive by the Commission is formally the responsibil-
ity of the Council Presidency.
The role of consultancies and environmental NGOs in
the European policy network on emissions trading
Since the beginning of the discussion on emis-
sions trading in the EU, scientists with recognised
expertise and competence were invited to co-operate
with the EU Commission. In autumn 1998, DG
Environment contacted experts from the Foundation
for Environmental Law and Development (FIELD)
to discuss a possible EU-wide emissions trading sys-
tem. At the same time, during the preparation of the
Green Paper, four studies were commissioned to
prepare and accompany the development of an
emissions trading system (Capros & Mantzos,
2000; CCAP, 1999; FIELD, 2000; IPTS, 2000). All
four were central for the EU Commission in order
to gain knowledge about the instrument of emis-
sions trading. Moreover, they had a lasting in?u-
ence on the composition of the Green Paper and
later on the design of the emissions trading
directive.
In the early stages of the discussion two studies –
the one conducted by the Institute for Prospective
Technological Studies (IPTS, 2000) and the one con-
ducted by Capros and Mantzos (2000) – were cru-
cial in providing DG Environment with knowledge
about the economic e?ects of a potential EU-wide
emissions trading scheme. Both studies helped DG
Environment to make the case for such a scheme
as it would lead to substantial economic gains
within the European Union compared to not intro-
ducing a trading scheme. While the IPTS study cal-
culated that ‘‘the overall EU abatement cost
reduction is of the order of 0.05% of the Union’s
2010 GDP [which] . . . would be equivalent to a
25% reduction in the cost burden” (IPTS, 2000, p.
4), Capros and Mantzos, calculated that ‘‘gains in
terms of total compliance costs, compared to the
Reference case, range from 20.7% to 34.0% depend-
ing on the emissions trading scheme” (Capros &
Mantzos, 2000, p. 15).
Regarding the design of the EU ETS, the Foun-
dation for Environmental Law and Development has
been one of the most in?uential actors. In the early
stages of the discussion they have had a major
in?uence on the decision of whether emission cer-
ti?cates should ?rst apply ‘downstream’ (to emit-
ters) or ‘upstream’ (to fuel suppliers or
producers). In contrast to the Center for Clean
Air Policy (CCAP) who proposed an ‘upstream’
model (CCAP, 1999) which was supported by envi-
ronmental groups and the European Parliament
(cf. CAN, 2000, p. 5; European Parliament, 2000,
p. 13), FIELD’s recommendation for a ‘down-
stream’ model – as already re?ected in the Green
Paper – prevailed (cf. FIELD, 2000, p. 23). While
both, FIELD and CCAP were indispensable in
the initial phase for ‘capacity-building’ in the Com-
mission (Vis, 2005), FIELD – then with CCAP as
subcontractor – became DG Environment’s main
consultant on emissions trading culminating in
the authoring of the ?rst draft of the EU Emis-
sions Trading Directive which was handed over
478 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
to DG Environment on 9 May 2001 (cf. FIELD,
2001, pp. 19–36). With only minor amendments
being made by DG Environment this draft was
then forwarded to the other Directorates-General
as the interservice consultation version of a pro-
posal for a directive on 31 May 2001. In order to
give an example for one of the design features pro-
posed by FIELD the intensively debated method
of allocation may be mentioned. For political rea-
sons FIELD recommended a ‘grandfathering’ prin-
ciple based on historical emission levels. While the
principle of free allocation prevailed, the lobbying
for a (partial) auctioning of certi?cates by the
EU Parliament and environmental NGOs resulted
in a compromise where Member States may volun-
tarily auction 5% in the ?rst trading period and
10% in the second period (European Commission,
2003a, Article 10).
Regarding knowledge about the environmental
e?ectiveness of a potential EU ETS experts from
environmental NGOs played an important role.
During the early stages of discussion, the main emis-
sions trading expert among the environmental
NGOs was Environmental Defense from the US
who not only came forward as a supporter of the
instrument during the discussions on the interna-
tional level in the framework of the UNFCCC nego-
tiations. As one of the earliest advocates of
emissions trading Environmental Defense soon
became one of the leading experts on this instru-
ment. On the one hand they have been part of the
proposal and development of the SO
2
emissions
trading scheme for utilities in the United States –
the only other large-scale emissions trading scheme
that existed before the EU ETS – and on the other
hand they have been asked by BP in 1997 to help
them designing a company-internal emissions trad-
ing scheme (cf. Section ‘‘The role of the business
sector in the European policy network on emissions
trading”) after successfully lobbying BPs CEO John
Browne to adopt such a scheme within the com-
pany. Due to their knowledge of how to design an
emissions trading scheme Environmental Defense
became BP’s most important advisor for preparing
and setting-up the internal scheme, even being a
member of the steering committee for the internal
scheme (Wriglesworth, 2008), and they ‘‘helped
key BP managers gain familiarity with the instru-
ment by leading workshops on trading for BP that
gave particular attention to topics such as monitor-
ing systems, trading rules and enforcement” (Victor
& House, 2006, p. 2102).
While during the agenda-setting process DG
Environment was in contact with Environmental
Defense as well as with other experts from the US
such as Brian McLean from the Environmental Pro-
tection Agency (EPA), responsible for the American
sulphur trading scheme as well as with other instiga-
tors of the SO
2
-scheme from the US such as Robert
N. Stavins from Resources for the Future – now at
Harvard University – or Denny Ellerman from the
Massachusetts Institute of Technology (Vis, 2008),
the European environmental NGOs entered the
scene at a somewhat later stage. When discussions
started on the European level they were very critical
towards a potential EU-wide emissions trading
scheme. When in January 1998, just a few months
after the 6th Conference of the Parties to the
UNFCCC in Kyoto, DG Environment invited sev-
eral environmental NGOs to sound them out about
emissions trading within the EU itself their opinion
was still coined by the environmental problems
associated with international emissions trading in
the Kyoto Protocol – primarily the possibility of
trading ‘hot air’ from countries of the former
USSR. However, this meeting proved to be crucial
for the environmental NGOs’ view on emissions
trading in Europe and they began to realise that
the envisaged company-based EU scheme would
not have the same kind of loopholes and leakage
problems as emissions trading in the Kyoto Proto-
col and may therefore be much more e?ective from
an environmental point of view (Singer, 2005;
Duwe, 2008). Since then, Brussels-based environ-
mental NGOs began to strongly work on how the
environmental e?ectiveness of an EU ETS could
be ensured, generating considerable expertise on this
issue. This was one of the reasons why DG Environ-
ment invited experts from the Climate Action Net-
work (CAN) Europe and from the World Wide
Fund for Nature (WWF) to take part in the consul-
tations on the design of the EU ETS within the
European Climate Change Programme (ECCP) (cf.
Section ‘‘The role of the business sector in the Euro-
pean policy network on emissions trading”).
The role of the business sector in the European policy
network on emissions trading
Section ‘‘The development of emissions trading
into a cornerstone of the European Union’s climate
policy” has already highlighted some national initia-
tives for emissions trading schemes and the support-
ing role that parts of the business sector have played
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 479
in these. Although the opinions about the establish-
ment of an EU-wide emissions trading system
among businesses were quite heterogeneous (Euro-
pean Commission, 2001b, pp. 2–4) and there clearly
was strong opposition from certain branches of
industry, large parts of the business community
were rather sympathetic to the introduction of such
a scheme (Christiansen & Wettestad, 2003, p. 9).
While some of the big European industry associates
such as the Union of Industrial and Employers’ Con-
federation of Europe (UNICE) and the Union of the
Electricity Industry (EURELECTRIC) generally
were in favour of the introduction of an emissions
trading scheme in Europe (Kyte, 2008; Wrigles-
worth, 2008), some actors from the business com-
munity, for instance the German chemical
company BASF along with the German chemical
industry association (VCI) and the Federation of
German Industries (BDI) as well as the European
Chemical Industry Council (CEFIC), adamantly
refused the introduction of emissions trading in
the EU (Schafhausen, 2008; Egenhofer, 2008;
Duwe, 2008; cf. Santarius & Braun, 2008).
To facilitate the exchange of knowledge about
emissions trading, the Commission organised a con-
sultation process in the framework of the working
group ‘Flexible Mechanisms’ of the European Cli-
mate Change Programme (ECCP). Between July
2000 and May 2001 ten meetings took place with
more than thirty representatives from Member
States, individual companies, business associations
and a few environmental NGOs to discuss various
design options for a European trading scheme
3
(e.g. grandfathering or auctioning, absolute or rela-
tive targets, voluntary or mandatory participation,
which gases to include). For DG Environment the
meetings of the ECCP proved to be important for
‘capacity-building’ in the Commission, enabling
ideas to be tried out and further developed. By
going through the process of the ECCP DG Envi-
ronment’s sta?s’ thoughts and understanding
improved a lot (Vis, 2005, 2008). Also, in September
2001, the Commission organised a consultation
meeting with representatives from the industry sec-
tor and environmental NGOs after which the Com-
mission concluded that a mandatory emissions
trading scheme appeared to be generally accepted.
All participants, including those from the business
sector, agreed that ‘‘emissions trading would o?er
a desirable additional instrument for achieving
reductions in emissions of greenhouse gases ful?ll-
ing the EU’s international commitments” (Euro-
pean Commission, 2001d, p. 2).
However, the positions on and the knowledge
about emissions trading of the participating busi-
ness representatives in these formalised information
exchanges were fairly di?use. While the discussions
themselves were much more necessary in order to
get the necessary support from stakeholders and
to organise majorities learning processes with an
in?uence on the design of the EU ETS were for
the most part con?ned to informal meetings of
DG Environment with those actors from the busi-
ness sector that were knowledgeable about emis-
sions trading. One of the most important actors
among the individual companies for the agenda-
setting for and during the negotiations on the
European scheme has been BP. In 1998, BP started
to experiment with emissions trading in order to
reach its internal emissions reduction target of
10% below 1990 level until 2012 as announced by
BP’s CEO Sir John Browne at a speech at Stanford
University in May 1997 (Browne, 1997). In the fall
of 1998 BP started a small pilot trading scheme
with 12 large business units, and in January 2000
BP ?nally implemented a large-scale company-
internal greenhouse gas emissions trading system
– in fact the ?rst global emissions trading system
– which encompassed all of BP’s business units
world-wide (Skjrseth & Skodvin, 2003; Victor &
House, 2006). Although Shell also started a small
internal emissions trading scheme in 2000, it was
the implementation of the BP scheme in particular
which constituted an increasingly powerful driver
in the EU’s emissions trading discussion (Vis,
2008; Zapfel & Vainio, 2002, p. 9) due to the tre-
mendous success of the programme in having
reached BP’s 10% reduction goal ‘‘seven years
ahead of schedule while generating $650 million
in new shareholder value” (Victor & House, 2006,
p. 2100). Especially the fact that BP saved more
money than emissions trading cost themselves was
a very positive message for DG Environment to
take away from BP’s internal scheme (Vis, 2008).
Regarding the agenda-setting for the EU ETS it
can be concluded that especially ‘‘the example of
the BP scheme, and the eloquent advocacy of car-
bon trading by BP sta?, were in?uential in laying
the political groundwork for the European carbon
market” (MacKenzie, 2007, p. 31).
3
see: Accessed 14.05.08.
480 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
Policy network theory has made clear that the
state which is responsible for the formulation and
implementation of public policies is increasingly
dependent on the business sector as it often lacks
the speci?c policy resources, particularly issue-spe-
ci?c expert knowledge, necessary for the develop-
ment of e?ective policy instruments. Therefore,
they frequently have to rely on complementary
resources of businesses which dispose of these
resources (Schneider, 2006, p. 124). And also in this
respect – not just for setting the agenda for emissions
trading in Europe – BP has been very important as
they had valuable knowledge about how to design
an emissions trading scheme due the practical expe-
riences they have made within their internal scheme.
For example, during the early phase of the discus-
sions on the design of the EU ETS BP – as well as
Shell – explained to DG Environment that for the
e?ectiveness of the scheme it was better to have abso-
lute instead of relative targets, the latter being
favoured by many companies and business associa-
tions at that time, and that is was better to have a
mandatory instead of a voluntary scheme (Wrigles-
worth, 2008; Hone, 2008). Yet, of utmost impor-
tance was BP’s substantial knowledge about the
monitoring, reporting and veri?cation of emissions
which in?uenced the Commission’s decision to start
the EU ETS with CO
2
only as BP had experienced
quite some di?culties with monitoring methane.
Furthermore, BP explained to DG Environment
the negative experiences they had made with grand-
fathering (von Meyerinck, 2008). While they both
knew that auctioning as a method of allocation
was not politically feasible right from the start as this
was opposed by most actors from the business sector
DG Environment has now put auctioning back on
the table to become the basic method of allocation
from 2013 onwards (European Commission, 2008).
However, BP and Shell were not the only in?uen-
tial actors from the business community. For exam-
ple, DG Environment had some good dialogue and
exchange with the Union of the Electricity Industry
(EURELECTRIC) (Vis, 2008) who not only came
forward as a supporter of the introduction of a
EU ETS (EURELECTRIC, 2000) but who were
also conducting a trading simulations programme
based on a ?exible, scenario-based model: the
Greenhouse Gas Emissions Trading Simulations
(GETS). The programme consisted of four stages
from GETS 1 in 1999 to GETS 4 in 2004 in order
to explore, gain experience and understand the
e?ects of di?erent design features within an emis-
sions trading scheme and to further develop the
assessment of an emissions trading market. While
GETS 1 and GETS 2 showed that emissions trading
was possible and that what many companies have
been frightened of, the trading part, was actually
very simple (Kyte, 2008), GETS 3 was carried out
speci?cally ‘‘to assess a number of Key Issues sur-
rounding the design, operation and implementation
of a European Emissions Trading (ET) Scheme”
(EURELECTRIC, 2002, p. 1).
Another important actor from the business sector
has been the Union of Industrial and Employers’ Con-
federation of Europe (UNICE) which in its reply to
the EU Green Paper on emissions trading generally
supported emissions trading as an instrument which
allows for companies to reach emissions reductions
in a ?exible and cost-e?ective way (UNICE, 2000).
As regards the discussion on the establishment of
the EU ETS one of the key ?gures from UNICE
has been Mike Wriglesworth from BP who also rep-
resented UNICE in the meetings with DG Environ-
ment in the framework of the European Climate
Change Programme (ECCP) and was able to intro-
duce the knowledge gained within BP’s internal emis-
sions trading scheme via this route as well – apart
from all the informal meetings he had with sta? from
DG Environment (Wriglesworth, 2008). In addition,
there has also been an energy-intensive company that
came out as an early supporter of emissions trading,
the French cement producer Lafarge who in 2000
had also started to experiment with projects designed
after criteria of the Clean Development Mechanism
(CDM) (Boyd, 2008). Interestingly, on the EU level
Lafarge was represented by its Head of Public A?airs
and Environment, Chris Boyd, who had formerly
been the assistant to Jim Currie, the director of DG
Environment from 1997–2001. Yet, Lafarge and
many other companies and business associations
that supported the introduction of an EU-wide emis-
sions trading scheme, such as the companies that par-
ticipated in the UK. emissions trading scheme, were
more important for winning widespread political
support for a EU ETS instead of being able to share
their technical and economic knowledge for design-
ing the directive in the same way as BP, Shell, EUR-
ELECTRIC and UNICE did.
Policy entrepreneurs in the European policy network
on emissions trading
As illustrated above, experts from consultancies,
environmental NGOs and the business sector did
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 481
have an in?uence on the development of the Euro-
pean Emissions Trading Directive. Due to the
knowledge they had on emissions trading – either
on a theoretical level or based on practical experi-
ences – they had been regularly contacted by DG
Environment, formally responsible for the develop-
ment of a Community emissions trading system,
thereby establishing an (informal) European policy
network on emissions trading. However, as DG
Environment was responsible for organising, and
most importantly, was able to dominate this Euro-
pean emissions trading policy network by adminis-
tering the learning processes taking place within
the network a few individuals of its personnel man-
aged to take up the role of policy entrepreneurs for
the development of the EU ETS well beyond DG
Environment’s formal responsibility to propose the
emissions trading scheme as a new instrument with
the EU’s climate policy mix.
A policy entrepreneur is a promoter who, on the
one hand, is capable of developing a policy idea
and, on the other, is able to win support for this idea
in the policy-making process. ‘‘Policy Entrepreneurs
advocate new ideas and develop proposals, de?ne
and reframe problems; specify policy alternatives;
broker the ideas among the many policy actors;
mobilize public opinion; help set the decision-mak-
ing agenda” (Roberts & King, 1991, p. 148). They
are individuals which intend to initiate dynamic pol-
icy change by engaging in a variety of strategies to
advance the successful adoption of policy ideas.
‘‘These include identifying problems, networking
in policy circles, shaping the terms of policy debates,
and building coalitions” (Mintrom, 1997, p. 739).
Policy entrepreneurs pursue the goal to leverage
the implementation of policy instruments by con-
vincing other actors involved in the policy-making
process from their ideas and by persuading critics
to rethink their position. It is the embeddedness of
involved actors into the structure of a policy net-
work that supports policy entrepreneurs in reaching
these goals. ‘‘Through networks, participants can
build alliances, share discourses and construct con-
sensual knowledge. From this basis, policy entrepre-
neurs can work to shape the terms of debate,
networking with members of a policy-making com-
munity, crafting arguments and ‘brokering’ their
ideas to potential political supporters and patrons”
(Stone, 2001, p. 15).
While the exchange of resources constitutes the
basis of a policy network and the possession of
resources allows for an individual to become part
of the policy network – as we have seen above – it
is the management of the exchange of resources in
a policy network which enables someone to become
a policy entrepreneur. The concept of policy entre-
preneurship reveals that individuals are important
actors and that, in the end, policies are being framed
and shaped by individuals or by groups of individu-
als that are able to most e?ectively make use of the
resources accumulated in a policy network.
As con?rmed by all interviewees the ones which
were able to act as policy entrepreneurs for the
development of the European Emissions Trading
Directive were most notably Jos Delbeke, Peter
Vis and from 2000 on also Peter Zapfel, from DG
Environment as the ones responsible for the devel-
opment of the directive. On the basis of all the tech-
nical and economic knowledge about emissions
trading these individuals have been able to organise
the necessary political majorities among all the rele-
vant stakeholders and among the Member States
and the European Parliament in order to get the
European Emissions Trading Directive adopted.
In the search for solutions and mediations, these
individuals repeatedly found ways to speed up the
policy process, to expand the room for manoeuvre
and to create new latitude for other actors. In this,
sta? at DG Environment bene?ted from the knowl-
edge they had gained in the framework of the policy
network between 1998 and 2001 (when the discus-
sion on the directive became public) in commission-
ing studies, organising stakeholder dialogues,
collaborating formally and informally with knowl-
edgeable actors from consultancies, environmental
NGOs and the business sector as well as working
internally on the directive. They were then able to
use these systematically acquired skills and know-
how to give them a strategic advantage in negotia-
tions with sta? from other Directorates-General,
with representatives of Member States in the Coun-
cil, the Committee of Permanent Representatives
(COREPER) and the Council working group as
well as with Members of the European Parliament
and miscellaneous stakeholders. The reason for
these policy entrepreneurs to be able to take up this
dominant role was largely based on the fact that
they had much more knowledge about emissions
trading as other participants in the negotiations
which led to a leap in con?dence (Vis, 2005).
Although the conduct of negotiations after the
proposal of a draft directive by the Commission is
formally the responsibility of the Council Presi-
dency, all interviewees have stated that DG Envi-
482 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
ronment maintained a guiding role throughout the
negotiations on the development of the EU ETS.
While Jos Delbeke was present at all the COREPER
meetings, Peter Vis attended all the sessions of the
Council working group which was important in
itself as presidencies change every half year while
Vis remained to be the Commission representative
on the ?le all the time (Vis, 2008). Moreover,
through Commissioner Wallstro¨ m, with whom they
kept up a close relationship, DG Environment also
had a dominant in?uence on the negotiations within
the Council of Ministers. The regular contact with
Jorge Moreira da Silva, rapporteur in the European
Parliament, was further used to anticipate di?er-
ences of opinion among the Council, Parliament
and Commission, to search for compromises and
to prepare processes of coordination (Vis, 2005,
2008). Moreira da Silva, who during the negotia-
tions in the EU Parliament became yet another
important policy entrepreneur, displayed a capacity
to build alliances and to put together a cross-party
consensus on the directive, covering both progres-
sive-environmentalist and conservative pro-business
fractions (Vis, 2005, 2008). Furthermore, due to the
speed of the negotiating process other actors had lit-
tle time to develop negotiating skills or to put for-
ward alternative conceptions as they simply lacked
the knowledge (Singer, 2005) which was concen-
trated in the hands of the policy entrepreneurs.
In its dealings with other Directorates-General
within the Commission, DG Environment was able
to take such advantage of its superior knowledge
and argument – supported by the move of Peter
Zapfel, who had studied emissions trading at Har-
vard University, from DG Economic and Financial
A?airs to DG Environment in 2000 – that during
the interservice consultations the directive moved
essentially unchanged from the ?rst draft proposal
in May 2001 through the second draft proposal in
September to the third and ?nal proposal as pub-
lished on 23 October 2001 (European Commission,
2001a). Although a number of other directorates –
DG Enterprise and Industry, DG Competition,
DG Transport and Energy, DG Economic and
Financial A?airs and DG Internal Market and Ser-
vices – expressed their reservations about certain
points they were not able to assert themselves due
to the head start in knowledge DG Environment
had (Vis, 2008) based on the studies they had com-
missioned and all the discussions they have had with
knowledgeable actors from consultancies, environ-
mental NGOs and the business sector. In addition,
DG Environment made tactical use of their head
start in knowledge in order to be able to steer the
policy-making process. For example they took the
other DGs completely by surprise when in May
2001 – just a few days after the ?nal meeting of
the ECCP working group – they already handed
over the ?rst draft proposal for the interservice con-
sultations (Ehrenberg, 2008).
It can be concluded that it was the advantage of
superior knowledge in the framework of the Euro-
pean policy network on emissions trading which
allowed for some sta? members of DG Environ-
ment to take up such a dominant role as policy
entrepreneur for the development of the European
Emissions Trading Directive. Also, the policy net-
work explains why some policy-makers from DG
Environment have been able to keep up this domi-
nant role after the proposal for a Community-wide
emissions trading scheme had been introduced. In
establishing the European emissions trading policy
network when they needed to gain knowledge about
emissions trading from experts from consultancies,
environmental NGOs and the business sector in
order to formulate the EU ETS proposal sta? mem-
bers from DG Environment have been able to
become the ‘managers’ of the exchange of knowl-
edge about emissions trading and were able to accu-
mulate the knowledge shared within the policy
network. A few individuals from DG Environment
were the ones who managed the policy network
allowing them to stay a lot more knowledgeable
than all other actors involved in the policy process,
especially when the o?cial role of leading the nego-
tiation process formally would have switched to the
Council Presidency.
Conclusion – knowledge is power revisited
Based on the fact that policy-making in the EU is
embedded into a multi-level governance system
which encourages the emergence of policy networks
it has been elucidated how the European emissions
trading scheme has been established in the frame-
work of an (informal) policy network built on the
sharing of knowledge about emissions trading. It
is argued that the European Emissions Trading
Directive has been developed by an issue-speci?c
policy network: the European policy network on
emissions trading which has been established by
sta? members from DG Environment, including
experts from consultancies, environmental NGOs
and the business sector. It is concluded that the
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 483
sharing of knowledge about emissions trading and
design options for emissions trading schemes was
the key momentum for the establishment and conti-
nuity of this policy network and that the possession
of knowledge and the control over the knowledge
being shared were the main factors to allow for a
few sta? members from DG Environment to play
a dominant role as policy entrepreneurs for the
development of the emissions trading directive, even
beyond their formal role of just proposing the
scheme as representatives from the EU
Commission.
From a sociological perspective this ties up with
the debate on the relationship between knowledge
and power going back to Francis Bacon’s famous
aphorism ‘scientia potentia est’, these days usually
translated as ‘‘knowledge is power”, from his book
Meditationes Sacrae (1597). The analysis above
clearly has shown that ‘‘knowledge and information
are a resource that identi?es the powerful from the
non-powerful” (Bennett & Howlett, 1992, p. 290)
as the EU ETS has largely been established by a
few e?ective policy entrepreneurs from DG Envi-
ronment on the basis of the knowledge they gained
from – consciously or unconsciously – managing the
European policy network on emissions trading.
Most likely, they would not have been able to take
up this dominant role if they had not had the possi-
bility to always be a step ahead as regards knowl-
edge about emissions trading compared to other,
formally more powerful participants in the negotia-
tion process.
This puts the acquisition of knowledge at the cen-
tre of modern policy-making. Yet, in policy-making
processes knowledge is not per se linked with power.
Power depends on the kind of knowledge someone
disposes of as Foucault (1991) has already discussed
in his work on ‘governmentality’, a term which
points to the notion that power – in the sense of
governmental power – is not essentially limited to
the state and that power is increasingly dependent
on the availability of a speci?c kind of knowledge.
In this regard, Crozier and Friedberg (1993, p.
50f). have identi?ed expert knowledge as an impor-
tant source of power for an actor in a network.
Powerful is someone who has issue-speci?c knowl-
edge relevant for a certain policy, in this case knowl-
edge about emissions trading, in particular
knowledge about how it works and knowledge
about the potential (economic) impacts of di?erent
design features of emissions trading schemes. Those
who had such knowledge – experts from consultan-
cies, environmental NGOs, individual companies
and business associations – were able to in?uence
the policy-making process in the framework of the
European policy network on emissions trading
which they were a part of as knowledgeable individ-
uals. But in the end, the most knowledgeable indi-
viduals were also the most powerful ones: some
sta? members from DG Environment that were able
to take up the role of policy entrepreneurs based on
their role as ‘managers of knowledge generation’
within the European policy network on emissions
trading.
However, it requires further research whether
these conclusions also apply to policy-making pro-
cesses regarding the development of other policy
instruments. Is it really the existence of an issue-spe-
ci?c policy network which enables some members of
the network to become policy entrepreneurs, and is
this based on being more knowledgeable than other
members of the network? And could it have been
that other non-state members of the policy network
instead of sta? members from DG Environment
could have taken up the role as policy entrepreneurs
or is the condition to take up a dominant role rather
attached to the hierarchy criterion of being a repre-
sentative from the state and of being formally
responsible for steering the policy-making process?
These questions may be pulled together with the
theoretical discussion if governance processes in
multi-level systems can better be grasped by the con-
cept of hierarchy, market or network (Mayntz,
1996; Powell, 1990; Weyer, 2000). It seems as that
knowledge might serve as an important explanan-
dum in this debate.
List of conducted interviews
4
Boyd, Christopher (2008), Lafarge, International
Emissions Trading Association (IETA), Euro-
pean Round Table of Industrialists (ERT), 26
March 2008.
Brockhagen, Dietrich (2008), Federal Ministry
for the Environment, Nature Conservation and
Nuclear Safety, 29 February 2008.
Davies, Chris (2008), European Parliament, 5
March 2008.
Duwe, Matthias (2008), Climate Action Network
(CAN) Europe, 10 March 2008.
4
Some of the interviewees have moved to di?erent positions in
the meantime. A?liations given below are the ones the intervie-
wees have had during the establishment of the EU ETS.
484 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
Egenhofer, Christian (2008), Centre for Euro-
pean Policy Studies (CEPS), 11 March 2008.
Ehrenberg, Joachim (2008), EU Commission,
DG Enterprise and Industry, 7 March 2008.
Forth, Thomas (2004), Federal Ministry for the
Environment, Nature Conservation and Nuclear
Safety, 18 March 2004.
Gu¨ nther, Regine (2004), World Wide Fund for
Nature (WWF), 18 March 2004.
Hayden, Mark (2008), EU Commission, DG
Economic and Financial A?airs, 11 March 2008.
Hein, Joachim (2008), Federation of German
Industries (BDI), 27 February 2008.
Hone, David (2008), Shell International, Interna-
tional Emissions Trading Association, 16 April
2008.
Kyte, Bill (2008), Powergen, EURELECTRIC,
UK Emissions Trading Group, 8 April 2008.
Schafhausen, Franzjosef (2008), Federal Ministry
for the Environment, Nature Conservation and
Nuclear Safety, 27 February 2008.
Singer, Stephan (2005), World Wide Fund for
Nature (WWF), 18 February 2005.
Ste?e, Frank (2005), Green Parliamentary Group
in the German Bundestag, 2 March 2005.
Vis, Peter (2005), EU Commission, DG Environ-
ment, 18 February 2005.
Vis, Peter (2008), EU Commission, DG Environ-
ment, 7 March 2008.
von Meyerinck, Lutz (2008), Deutsche BP, 18
March 2008.
Wriglesworth, Michael (2008), BP, Union of
Industrial and Employers’ Confederation of Eur-
ope (UNICE), European Roundtable of Indus-
trialists (ERT), European Chemical Industry
Council (CEFIC), Centre for European Policy
Studies (CEPS), 6 March 2008.
Acknowledgement
An earlier version of this paper was presented to
the workshop ‘Carbon Markets in Social Science
Perspective’ at the Institute of Advanced Study,
Durham University, on 7 November 2007.
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M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 487
doc_775324334.pdf
This paper starts with a recapitulation of how emissions trading became a cornerstone of the European Union’s climate
policy. While a whole bouquet of reasons can be identified the major reasons why the EU Commission decided to pursue
the establishment of an emissions trading scheme within the EU are: (1) the integration of international emissions trading
into the Kyoto Protocol; (2) the failure of the 6th Conference of the Parties to the United Nations Framework Convention
on Climate Change (UNFCCC) and the withdrawal of the United States from the Kyoto Protocol negotiations; and (3) the
unsuccessful attempt to introduce an EU-wide CO2-tax
The evolution of emissions trading in the European Union –
The role of policy networks, knowledge and policy entrepreneurs
Marcel Braun
Rupprecht Consult, Forschung & Beratung GmbH, Hatzfeldstrasse 6, 51069 Ko¨ ln, Germany
Abstract
This paper starts with a recapitulation of how emissions trading became a cornerstone of the European Union’s climate
policy. While a whole bouquet of reasons can be identi?ed the major reasons why the EU Commission decided to pursue
the establishment of an emissions trading scheme within the EU are: (1) the integration of international emissions trading
into the Kyoto Protocol; (2) the failure of the 6th Conference of the Parties to the United Nations Framework Convention
on Climate Change (UNFCCC) and the withdrawal of the United States from the Kyoto Protocol negotiations; and (3) the
unsuccessful attempt to introduce an EU-wide CO
2
-tax. Other reasons were the fact that emissions trading did not need
unanimity in the European Council like the CO
2
-tax; the economic e?ciency of emissions trading which appealed not only
to the Commission but also to industry and Member States; the danger of a fragmented carbon market as the United King-
dom and Denmark had already set up domestic emissions trading schemes that were incompatible; the incentive a Euro-
pean emissions trading scheme would be for the formation of a global carbon market; and the possibility to in?uence
investment strategies of power companies towards a sustainable modernisation of the EU’s power generation
infrastructure.
Drawing upon these preconditions, this paper analyses the development of the European Union Emissions Trading
Scheme (EU ETS). Based on the fact that the EU is embedded in a multi-level policy-making architecture which encour-
ages the emergence of policy networks it is argued that the EU ETS has been shaped by an (informal) issue-speci?c policy
network established by some sta? members from DG Environment, including individuals knowledgeable on emissions
trading – such as experts from consultancies, environmental NGOs and the business sector. It is argued that within this
European policy network on emissions trading the European Emissions Trading Directive – as adopted on 13 October
2003 – has been negotiated and developed. It is concluded that the sharing of knowledge about this relatively new and
largely unknown regulatory instrument and about design options for a potential European emissions trading scheme
was the key momentum for the establishment and continuity of this policy network and that the ability of managing
knowledge generation processes was the main factor to allow for a few sta? members from DG Environment to play a
dominant role as policy entrepreneurs in developing the European Emissions Trading Directive, even beyond their formal
role of proposing the scheme as representatives from the EU Commission.
Ó 2008 Elsevier Ltd. All rights reserved.
0361-3682/$ - see front matter Ó 2008 Elsevier Ltd. All rights reserved.
doi:10.1016/j.aos.2008.06.002
E-mail address: [email protected]
Available online at www.sciencedirect.com
Accounting, Organizations and Society 34 (2009) 469–487
www.elsevier.com/locate/aos
Introduction
When in 1968 Canadian economist John H.
Dales published his book Pollution Property and
Prices (Dales, 1968), he might not have guessed
the importance of his idea of emissions trading for
today’s climate policy. But since then, his idea has
come a long way and the trading of greenhouse
gas emissions has become a key policy instrument
to tackle the problem of global climate change. On
a global level, emissions trading between govern-
ments has been established as one of three ?exible
mechanisms in the framework of the Kyoto Proto-
col. On the national level, many industrialised coun-
tries – rati?ers as well as non-rati?ers of the Kyoto
Protocol – have either introduced or are considering
company-based emissions trading systems (cf. Schu¨ le
& Sterk, 2008; Sterk, Braun, Haug, Korytarova, &
Scholten, 2006). And on the supranational level,
the European Union established today’s largest
company-based greenhouse gas emissions trading
scheme operating since January 2005. It encom-
passes about 11,500 installations from all its Mem-
ber States, responsible for around a third of the
EU’s greenhouse gas emissions, and roughly 45%
of the EU’s CO
2
emissions (Vis, 2006, p. 48).
In order to reach the Community’s emissions
reduction commitment of minus 8% compared to
1990 agreed to in the Kyoto Protocol the European
Commission proposed the establishment of a Euro-
pean Union Emissions Trading Scheme (EU ETS)
in the framework of its Post-Kyoto Strategy in June
1998 (European Commission, 1998). The proposal
was followed by a Green Paper in March 2000
(European Commission, 2000), a draft directive of
the European Commission in October 2001 (Euro-
pean Commission, 2001a), and a binding EU frame-
work directive – the European Emissions Trading
Directive – on 13 October 2003 (European Commis-
sion, 2003a). After having been implemented by all
EU Member States, the EU ETS ?nally went into
e?ect on 1 January 2005 encompassing CO
2
emis-
sions from combustion plants, oil re?neries, coke
ovens, iron and steel plants, and factories making
cement, glass, lime, brick, ceramics, pulp and paper.
By now emissions trading has developed into one of
the EU’s major instruments to combat climate
change and both, the European Commission and
the European Council have stated that they regard
the EU ETS as an ‘‘essential instrument for achiev-
ing the medium- and long-term emission reductions
that are necessary to stabilise greenhouse gas con-
centrations in the atmosphere” (European Commis-
sion, 2006, p. 2).
How does emissions trading work?
While emissions trading schemes di?er from each
other regarding the participants they cover – coun-
tries under the Kyoto Protocol; companies or users
of industrial installations in the EU or any domestic
scheme – the principle of the cap-and-trade market
mechanism is the same. Participants are allocated a
certain quantity of emission allowances in accor-
dance with their historical emissions less a speci?ed
reduction commitment. Each emission allowance
entitles the party in question to emit one tonne of
carbon dioxide (or one tonne of CO
2
equivalent as
in the Kyoto Protocol) within a speci?ed period.
At the end of this obligation period, the party must
demonstrate that the extent of its emissions are cov-
ered by its emission allowances. Governments or
companies may acquire additional emission allow-
ances either by purchasing them from other market
participants or by carrying over any remaining
credit from one obligation period to the next. Those
which emit more than their allowance have to make
up the shortfall by acquiring the necessary allow-
ances from other market participants.
Emissions trading gives market participants the
?exibility to ful?l their reduction commitment either
by their own e?orts or through the purchase of
additional reduction certi?cates, but in the latter
case, since there is a ?xed number of emission allow-
ances within the system, other market participants
have to achieve a correspondingly greater reduction.
In terms of economic theory, emission allowance
trading ensures that reductions are achieved where
one tonne of carbon dioxide can be avoided most
cost-e?ectively – assuming a ‘perfect market’ and
‘complete information’. Emissions trading therefore
minimizes the total cost to the economy of all avoid-
ance measures.
The economic implications of emissions trading
From an economic point of view the establish-
ment of an emissions trading scheme involves a
major e?ort at shifting the ‘‘calculation mechanism”
of market economies by putting a price on green-
house gas emissions, and thus ‘‘internalising” the
externality that they involve (MacKenzie, 2008).
This means that emitting greenhouse gases becomes
part of economic calculations as a direct or as an
470 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
opportunity cost. By allocating or selling emissions
allowances the state – or another regulatory body –
hustles companies into including the external costs
of environmental damages caused by greenhouse
gas emissions into their investment and costing plan-
ning in the same way as other production factors
which, in turn, led to the establishment of a vibrant
new market with di?erent actors providing a wide
range of carbon-related ?nancial services (Runge-
Metzger, 2006, p. 271f). Incidentally, the fact that
emissions trading is making apparent the value of
the scarce common resource of a clean environment
(Vis, 2006, p. 47) and the economic implications of a
price signal for ?rms’ strategic decisions and risk
management strategies is being regarded by the EU
Commission as one of the instrument’s major
strengths and has therefore been one of the reasons
why the Commission decided to pursue the develop-
ment of a European trading scheme (see ‘‘The devel-
opment of emissions trading into a cornerstone of
the European Union’s climate policy”).
Furthermore, the creation of a carbon market has
implications for accounting issues (for a detailed dis-
cussion, see MacKenzie, 2009) and accountants are
still struggling to ?nd a standard treatment of allow-
ances as there currently is no guidance issued by an
authorised body such as the International Account-
ing Standards Board (IASB) and a draft for a poten-
tial mandatory accounting guideline from its
International Reporting Interpretations Committee
– IFRIC 3, Emission Rights – has led to public out-
cry resulting in the proposal being withdrawn (Casa-
mento, 2005; Cook, 2009). While many accounting
issues arising from emissions trading schemes remain
unsolved the IASB put the issue back on the table as
there is a risk of diverse accounting practices which
might impair the comparability and usefulness of
?nancial statement information. Currently, the
IASB is focussing on ?ve key questions, e.g., regard-
ing the nature of allowances – are they assets or not;
should they be treated as a license to emit or as a
form of emission currency – and their liability
(IASB, 2008). While the IASB is still discussing these
questions, accounting and ?nancial regulation issues
remain to be treated di?erently by companies cov-
ered by the EU ETS with companies’ accounting
frameworks being governed either by the EU’s
Accounting Regulatory Committee (Regulation
1606/2002/EC), by the International Accounting
Standards adopted by the EU Commission (Regula-
tion 1864/2005/EC) or by Member States’ domestic
legislation (Upston-Hooper et al., 2006, p. 13).
Outline and methodology
While the main concern of this paper is the anal-
ysis of the evolution of the European emissions
trading scheme, it is ?rst being explained in ‘‘The
development of emissions trading into a cornerstone
of the European Union’s climate policy” how and
why emissions trading developed into a cornerstone
of the EU’s climate policy. After outlining the theo-
retical considerations (‘‘Multi-level governance, pol-
icy networks, and the role of knowledge” ), Section
‘‘The development of the European emissions trad-
ing directive within a European policy network on
emissions trading” recapitulates the policy-making
process that led to the EU ETS: How has the Euro-
pean Emissions Trading Directive been developed?
Who were dominant actors and which were the gen-
eral conditions for these actors to be able to take up
a key role in the policy-making process? The paper’s
central hypothesis is that the sharing of knowledge
about emissions trading and design options for
emissions trading schemes was the key momentum
for the establishment and continuity of an issue-spe-
ci?c policy network and that the ability of managing
knowledge generation processes was the main factor
to allow for a few sta? members from DG Environ-
ment to play a dominant role as policy entrepre-
neurs in developing the emissions trading directive,
even beyond their formal role of proposing the
scheme as representatives from the EU
Commission.
To arrive at this conclusion 19 interviews have
been conducted with policy-makers and stakehold-
ers that have either been involved in the making
of the European Emissions Trading Directive or
have been close observers of the policy-making pro-
cess. Other sources of interpretative data are docu-
ments such as legislative documents or position
papers from companies, business associations and
NGOs. All this empirical material is then being ana-
lysed on the basis of a theoretical framework that
takes into account the relevance of policy networks
within multi-level systems, the role of knowledge in
policy processes as well as the role of policy
entrepreneurs.
The development of emissions trading into a
cornerstone of the European Union’s climate policy
A whole bouquet of reasons can be identi?ed
why the European Union pursued the development
of the EU ETS in the ?rst place. One of the main
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 471
in?uences on the EU’s discussion about a common
climate policy strategy and the role that emissions
trading might take is to be found in the interna-
tional climate negotiations, speci?cally in the inte-
gration of international emissions trading into the
Kyoto Protocol. In the early 1990s, several interna-
tional and supranational organisations have set the
agenda for greenhouse gas emissions trading. The
most important actors were the Organisation for
Economic Cooperation and Development (OECD)
which published a study investigating US experi-
ences with sulphur dioxide emissions trading and
considering the scope for an emissions trading sys-
tem at international level (Michaelowa, 2000, p.
27), the United Nations Conference on Trade and
Development (UNCTAD) which established a
Greenhouse Gas Emissions Trading Project and
published several studies within its framework
(e.g., UNCTAD, 1992), the US-based NGO Envi-
ronmental Defense which came out in support of
emissions trading in the early 1990s, and in 1991
published a study that advocated emissions trading
as a way of protecting the rainforest (cf. Dudek &
LeBlanc, 1991), and the International Energy
Agency (IEA) which together with the OECD pro-
vided the framework for the Annex-I Expert Group
in the talks leading up to the United Nations
Framework Convention on Climate Change
(UNFCCC) – the group which, in the course of
the international negotiations, developed into the
most important forum for the elaboration of an
emissions trading system (Oberthu¨ r & Ott, 1999,
p. 245).
Backed by the support of these organisations, the
United States demanded that emissions trading
should be integrated into the Kyoto Protocol as
one of three ?exible mechanisms. In late 1996, the
US began seriously to back the idea of emissions
trading. Other countries in the so-called JUSSC-
ANNZ Group
1
lined up behind the American posi-
tions (cf. Agrawala & Andresen, 2002, p. 48). The
EU countries, for their part, rejected emissions trad-
ing until the 3rd Conference of the Parties to the
United Nations Conference on Climate Change
(UNFCCC) in Kyoto, as they feared that Europe-
ans would regard emission certi?cates as a ‘right
to pollute’ or as ‘trading in indulgences’, that trad-
ing in this new and complex instrument would prove
impossible within the speci?ed time period, and that
the US had introduced the proposal in order to
delay the negotiations (see Grubb, Vrolijk, & Brack,
1999, p. 92). The developing countries, organised as
G77 + China, also rejected the proposal. But, since
Washington made its agreement to the Kyoto Pro-
tocol dependent on acceptance of emissions trading,
the EU Commission ?rst tied its consent to emis-
sions trading to international agreement on the level
of reduction commitments, then ?nally accepted it
on condition that it would take place ‘supplemen-
tary’ to domestic policies and measures (Grubb
et al., 1999, p. 94). In 1999, the European Council
had substantialised the EU’s claim for ‘supplemen-
tarity’ by agreeing that a maximum of 50% of
national obligations should be met through the
deployment of ?exible mechanisms (Torvanger,
2001, p. 2), and the EU had called for a correspond-
ing reduction of international emissions trading
(UNFCCC, 1998, p. 3). Hence in November 2000,
when Dutch minister Jan Pronk, the chairman of
the negotiations, tabled a ‘soft’ compromise at the
?rst part of the 6th Conference of the Parties in
The Hague calling for Annex-I countries to meet
their obligations ‘primarily’ through national mea-
sures (UNFCCC, 2000, p. 10), his proposal was
rejected by the EU.
Finally, in March 2001, newly-elected US Pres-
ident Bush jr. announced the United States’ with-
drawal from the Kyoto Protocol. This proved to
be one of the main factors for the alteration of
the EU’s position on emissions trading from rejec-
tion to support – together with the failure of the
?rst part of the 6th Conference of the Parties in
The Hague. The crisis in the international negoti-
ations proved to be an increasingly important dri-
ver of emissions trading within the European
Union. ‘‘These events united Europe and triggered
further interest in the establishment of an EU-
wide market in GHG permits” (Zapfel & Vainio,
2002, p. 12).
The US withdrawal from the Kyoto process left
the EU with virtually no leeway to strike a bargain
with other countries over their respective demands.
As the EU’s top priority was now to bring the talks
to some conclusion, even without the US, it could
not give de?nite shape to the supplementarity clause
but had to abandon its demand for an upper limit
on the use of emissions trading in favour of the leg-
ally weaker formulation that Annex-I countries
would meet their reduction obligations ‘chie?y’
through national measures (UNFCCC, 2001, p. 3).
1
Japan, the US, Switzerland, Canada, Norway, and New
Zealand.
472 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
But the acceptance of (the rather weak legal set-
up of) the instrument of emissions trading in the
framework of the Kyoto Protocol was not the only
catalyst why the EU started to seriously consider
emissions trading as a useful policy instrument
within its own climate policy mix. Another major
reason for emissions trading to become a corner-
stone of the European Union’s climate policy was
the failure to introduce an EU-wide CO
2
-tax.
In 1992 the EU Commission proposed the intro-
duction of such a Community-wide tax for the
reduction of CO
2
emissions. But the proposal failed
due to the unanimity within the Council of Finance
Ministers necessary concerning ?scal matters. And
it was not just several EU Member States that
opposed the proposal for a European carbon tax;
it was also undermined by intense lobbying from
the industry sector (Duwe, 2008; Wettestad, 2005,
p. 8). Likewise, a revised proposal from 1995 did
not come into e?ect, hampered in particular by Ger-
many insisting on such demanding tax rates that the
proposal had to fail just like the 1992 proposal. The
carbon tax that was ?nally introduced in 1997 on
the EU level was so much watered-down that its
impact was practically irrelevant (Santarius &
Braun, 2008).
Moreover, for emissions trading it was not neces-
sary to reach unanimity in the Council of Environ-
ment Ministers because as an environmental policy
measure emissions trading required only a quali?ed
majority based on Art. 175 (1) of the EU Treaty.
2
In
contrast to the ?scal policy instrument of a carbon
tax, emissions trading could not be blocked by a
single Member State. So even if some Member
Countries refused a consensus, danger of a ‘joint-
decision trap’ (Scharpf, 1985) – a blockade of a deci-
sion that needs to be taken by mutual agreement
among players at di?erent political levels within a
given multi-level policy system – was much weaker.
When it became evident for EU policy-makers
that they will not be able to get an EU-wide CO
2
-
tax adopted in the near future, the European Union
desperately needed to develop another policy instru-
ment which would enable the Union to reach the
reduction target of minus 8% compared to 1990 lev-
els in the period 2008 to 2012 as agreed to in Kyoto
– especially against the background that the EU
Commission was told by its legal service that it
could only ratify the Kyoto-Protocol if it also had
some levers for implementation (Wriglesworth,
2008). In this regard, the instrument of emissions
trading became increasingly appealing to the EU
Commission as emissions trading was economically
being regarded as the most cost-e?cient means to
reach emissions reductions. This ?t well to the Euro-
pean Union’s intention to increasingly take into
consideration ‘‘economic concepts such as the pol-
luter-pays principle and the requirement to carry
out an analysis of costs and bene?ts of environmen-
tal policies” (Delbeke, 2006: vii). Moreover, the eco-
nomic e?ciency of the instrument of emissions
trading was the major reason why the other Direc-
torates-General basically supported the introduc-
tion of a EU ETS (Ehrenberg, 2008).
Also, industry was much more open towards
emissions trading due to its ?exibility and cost-e?ec-
tiveness. As the instrument was generally supported
by a majority of European business and industry
groups (Hone, 2008; Kyte, 2008; Wriglesworth,
2008), their opposition against emissions trading
was not as intense compared to the lobbying e?orts
against an EU-wide CO
2
-tax. There even were ini-
tiatives pro emissions trading among the business
community. In order to draw EU policy maker’s
attention to emissions trading as an alternative to
a carbon tax, in 1999 for example, companies from
the United Kingdom initiated the formation of a
national ‘Emissions Trading Group’ to develop a
voluntary emissions trading scheme in Britain as
an alternative to tax proposals, endorsed and ?nan-
cially supported by the British government in 2002
(Kyte, 2008). And also in Denmark, a small
national emissions trading scheme had been estab-
lished in 1999, moderately supported by the targeted
power companies as the instrument would run easily
alongside competition (Pedersen, 2000). Likewise
although not successful, the Norwegian business
community proposed the establishment of a
national emissions trading scheme (Hoibye, 1999).
Furthermore, there were a few companies that had
already started to experiment internally with emis-
sions trading, among them BP and Shell (see ‘‘The
role of the business sector in the European policy
network on emissions trading”). Especially BP lob-
bied heavily for the instrument and was very impor-
2
While there has not been made any use of a majority voting
procedure – regarding emissions trading all decisions have been
made unanimously – it might still have served as a potential
menace in the background. Rather the EU Commission, precisely
its DG Environment, has been successful in preventing the use of
a majority voting due to its dominant role as a policy entrepre-
neur in the policy-making process as will be elucidated in Section
‘‘The development of the European emissions trading directive
within a European policy network on emissions trading”.
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 473
tant in setting the agenda for emissions trading, ?rst
for a domestic scheme in the UK and then also in
Brussels for an EU scheme (Wriglesworth, 2008).
While the above may be regarded as major rea-
sons there are several other factors that have con-
tributed to the European Commission’s decision to
pursue the establishment of an emissions trading
scheme within the EU:
DG Environment realised that from an economic
point of view emissions trading is equivalent to a
CO
2
-tax if the permits are fully auctioned. While
DG Environment knew that they would not be
able to get an EU ETS with auctioning right
from the start as industry and Member States
?ercely opposed auctioning they realised that
once the system was up and running they might
be able to introduce auctioning at a later state.
And in fact, this is what the EU-Commission is
striving for in its 2008 proposal for a revised
emissions trading directive (European Commis-
sion, 2008, p. 7f). In this sense, the Commission
anticipated early on that emissions trading with
free allocation at ?rst opens the door to a rather
opaque political feasibility (Boyd, 2008).
From an economic point of view again, DG
Environment regards the internalisation of exter-
nalities as one of the major strengths of the
instrument because emission permits have a
value. ‘‘What is so powerful about emissions
trading is that it ‘translates’ into ?nancial terms
the need to address a particular environmental
objective. In companies, this means that taking
the environment into account extends beyond
the remit of the Environment, Health and Safety
Manager, to the Financial Director, and into the
Boardroom itself, where the deployment of capi-
tal is tested also against the ?nancial conse-
quences and opportunities of environmental
constraints” (Vis, 2006, p. 46).
While the United Kingdom and Denmark had
already established domestic emissions trading
schemes which proved to be incompatible and
with some other EU Member States starting to
think about domestic schemes as well there was
a danger of a fragmented carbon market consist-
ing of many incompatible domestic schemes
(Convery, Ellerman, & de Perthuis, 2008, p. 8).
On the other hand, many Member States were
rather inactive as regards climate policy and
DG Environment realised that it can back all
these countries to work out a national climate
policy strategy as a necessary basis for each
Member State to prepare a National Allocation
Plan as required in the foreseen directive for an
EU ETS. In turn, the existence of national strat-
egies towards climate change was a precondition
for the EU Commission to be able to formulate
an overall EU climate policy strategy with targets
and timetables (Wriglesworth, 2008).
The EU ETS might serve as a major incentive to
the formation of a global carbon market (Ehren-
berg, 2008), not just due to its own size but more
so by opening the door to link the EU ETS to
other regional and national emissions trading
schemes (European Commission, 2003a, Article
25) and through linking the EU carbon market
to international projects by allowing companies
covered by the EU ETS to make use of credits
from the Kyoto-Protocol’s ?exible mechanisms
Joint Implementation and Clean Development
Mechanism as agreed to in the Linking Directive
(European Commission, 2003b).
Moreover, DG Environment realised that via the
instrument of emissions trading they would be
able to in?uence investment strategies of Euro-
pean power companies towards a sustainable
modernisation of the EU’s power generation
infrastructure. Seen from this angle emissions
trading is not just a climate policy instrument
that helps the EU to reach its reduction targets
but is also an instrument to in?uence energy pol-
icy and changes in the energy system, for example
regarding the future use of lignite and hard coal
(Forth, 2004).
Multi-level governance, policy networks, and the role
of knowledge
Following the recapitulation of how emissions
trading became one of the EU’s most important cli-
mate policy instruments, the analysis will now focus
on the development of the European Emissions
Trading Directive. Before though, a few preliminary
theoretical considerations need to be explained. The
starting point of the analysis is the concept of multi-
level governance which points to the fact – and the
reasons that led to the development of the EU ETS
elucidated above already gave some indications to
this – that modern policy-making, especially in the
European Union, is increasingly taking place within
a multi-level policy system. This multi-level gover-
nance system, in turn, promotes the emergence of
474 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
policy networks in which state and non-state actors
jointly negotiate and develop policies. The forma-
tion of such policy networks is based upon the
exchange of resources, and for the development of
the European Emissions Trading Directive the
resource of knowledge has been central.
Policy-making within a multi-level system
The concept of multi-level governance developed
from the lack of a theory or concept that could ade-
quately explain the integration process in the Euro-
pean Union and the alteration of the decision-
making processes this involves (Puchala, 1972, p.
276). In 1976, the increasing complexity of the
European policy process has been taken up from a
neo-functionalist perspective by Haas who intro-
duced the term ‘turbulence’ to not just explain
how the European Community is functioning but
also to re?ect the causes for the increasing co-oper-
ation and interaction between political actors from
di?erent levels:
‘‘Turbulence is the term we bestow on the con-
fused and clashing perceptions of organizational
actors which ?nd themselves in a setting of great
social complexity. The number of actors is very
large. Each pursues a variety of objectives which
are mutually incompatible; but each is also
unsure of the trade o?s between the objectives.
Each actor is tied into a network of interdepen-
dencies with other actors which are as confused
as the ?rst. Yet some of the objectives sought
by each cannot be obtained without co-operation
from the others. A turbulent ?eld, then, is a pol-
icy space in which this type of confusion domi-
nates discussion and negotiation. It can be
subnational, national, regional, inter-regional
and global – and all at the same time” (Haas,
1976, p. 179).
Behind the need for a political reconceptualisa-
tion of the European arena lays the basic assump-
tion that the EU is ‘‘a system of complex, multi-
tiered, geographically overlapping structures of
governmental and non-governmental elites” (Wes-
sels, 1997, p. 291). This view was strengthened by
the advance of the European integration process
following the Single Europe Act of 1987, which
for the ?rst time made it possible to reach agree-
ments by quali?ed majority voting and thereby
considerably expanded the room for political
action at EU level.
It took another ?ve years, until Gary Marks
(1992) introduced the concept of multi-level gover-
nance which he initially de?ned as ‘‘a system of con-
tinuous negotiation among nested governments at
several territorial tiers” (Marks, 1993, p. 392). Later
on, he and others stressed that both the individual
and the common room for action of national states
was limited not only by the constraints that other
states placed on their representatives within collec-
tive decision-making processes, but also by the fact
that they had to share their decision-making author-
ity with representatives of supranational, subnation-
al and non-governmental institutions (Marks,
Hooghe, & Blank, 1996, p. 371). This re?nement
of the de?nition makes clear that the concept of
multi-level governance is generally to be understood
as ‘‘the dispersion of central government authority
both vertically to actors located at other territorial
levels, and horizontally to non-state-actors” (Bache
& Flinders, 2004, p. 4).
In this re?ned conception, the institutional refer-
ence of multi-level governance is no longer a hierar-
chical territorial system limited to formal
institutions, but rather non-hierarchical, function-
ally oriented processes of interaction operating
within a certain context of problems and decisions
– processes which are constituted, and may at any
moment dissolve, through partnerships, networks
and agreements among public and private institu-
tions as well as individuals. For the interweaving
of di?erent levels and actors with one another is
not static but dynamic – and dependent upon the
respective policy ?eld. Multi-level governance thus
proves to be the exercise of authority irrespective
of the existence of formal structures of government;
it works itself out through complex negotiations
among actors at di?erent policy levels. The concept
highlights the fact that hierarchical political pat-
terns are increasingly replaced with governance in
interdependent policy networks, which involves a
multiplicity of actors without a central hierarchy.
Policy-making within policy networks
Policy-making in a multi-level system goes along
with the fact that policies are increasingly being
negotiated and developed within networks of state
and non-state actors from di?erent territorial levels.
Although implicitly applied in the concept of multi-
level governance it is policy network theory that
reveals the high relevance of (social) networks in
modern policy-making. Especially within the EU
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 475
such networks are more and more important due to
the supranational policy-making structure.
Similar to the concept of multi-level governance
the fundament of policy network theory is the
assumption that modern societies are increasingly
functionally di?erentiated due to their growing
complexity resulting in a loss of sovereignty of the
state to act and steer. Thus the state has to rely
increasingly on ‘soft’ steering mechanisms such as
bargaining, providing incentives, stimulating, mod-
erating and co-ordinating (Grande, 1993, p. 51).
Policy-making is increasingly being in?uenced by
public and private actors from all levels outside
the hierarchical control of governments. Against
this background, policy networks are de?ned as
‘‘webs of relatively stable and ongoing relationships
which mobilise and pool dispersed resources so that
collective (or parallel) action can be orchestrated
toward the solution of a common policy” (Kenis
& Schneider, 1991, p. 36). In this view, policy-mak-
ing is a process which involves a multitude of public
and private actors – be they individual or collective
– which join together in order to reach a collectively
binding agreement on a certain problem within a
certain policy ?eld in a predominantly informal
way and on a central, non-hierarchical level (Bo¨ rzel,
1997, p. 4). Policy network theory re?ects this alter-
ation of the relationship between the state and soci-
ety by being conceptualised as hybrid steering
mechanisms located in between the two conven-
tional forms of governance, hierarchy and market
(Scharpf, 1996).
In this respect, policy networks are a concept to
describe new forms of political steering or gover-
nance. Policy networks are conceived as a speci?c
form of interaction: non-hierarchical self-co-ordina-
tion (Knill, 2000, p. 117; Scharpf, 1996). On the one
hand, non-state actors strive to participate in the
policy-making process while such co-operation, on
the other hand, enables the state to gain access to
resources and expertise of private actors in order
to solve policy problems. Therefore, policy net-
works can typically be found in conjunction with
rather complex and resource- and knowledge-inten-
sive policy problems (e.g., climate change). Policy
networks are mechanisms to mobilise political
resources when capacities needed in the policy-mak-
ing process are distributed among many di?erent
public and private actors. ‘‘To sum up, in an
increasingly complex and dynamic environment,
where hierarchical co-ordination is rendered di?-
cult if not impossible and the potential for deregula-
tion is limited due to the problems of market failure
(. . .), governance becomes more and more only fea-
sible within policy networks, providing a framework
for the e?cient horizontal co-ordination of the
interests and actions of public and private corporate
actors, mutually dependent on their resources”
(Bo¨ rzel, 1997, p. 6).
Generally, policy networks might develop ad hoc
and relating to a certain policy issue (Schneider,
2004, p. 8). Such an (informal) issue-speci?c policy
network can also be identi?ed for the development
of the EU ETS, consisting of state actors, predom-
inantly from DG Environment of the European
Commission, and of non-state actors, such as
experts from consultancies, environmental NGOs,
individual companies and business associations. In
the framework of this European policy network
on emissions trading the European Emission Trad-
ing Directive has been largely discussed and
formulated.
Knowledge as a policy network’s key resource
‘‘Policy networks are mechanisms of political
resource mobilization in situations where the capac-
ity for decision-making, program formulation and
implementation is widely distributed or dispersed
among private and public actors” (Kenis & Schnei-
der, 1991, p. 41). A key momentum for the existence
of a policy network in this de?nition is the exchange
of resources and negotiations on the basis of these
resources. The centrality of resource dependencies
for the emergence and continued existence of policy
networks has been emphasised by many scholars,
among them for example Benson who de?ned policy
networks as ‘‘a cluster or complex of organizations
connected to each other by resource dependencies
and distinguished from other clusters or complexes
by breaks in the structure of resource dependencies”
(Benson, 1982, p. 148). According to Benson, policy
networks are patterns of relations between actors
created by interactions between interdependent
actors. These interdependencies constitute them-
selves and exist as long as an actor ‘‘cannot success-
fully complete a policy process that he himself has
activated without resources possessed by the other
actor(s)” (Klijn, 1996, p. 98).
As the state’s responsibilities are constantly
growing and are becoming more and more compli-
cated in a di?erentiated society, the state increas-
ingly needs to co-operate – at least informally –
with those non-state actors which possess these pol-
476 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
icy-relevant resources to accomplish its ever more
di?erentiating regulatory duties (Scharpf, 1992).
But resources are not just being exchanged within
network structures, they are also responsible for
the formation of a policy network. As the exchange
of resources is central within policy networks this
also implies that only those actors could become
part of a network which possess the respective
resources relevant for and of demand within the pol-
icy network.
The policy-relevant resources that are being
exchanged vary according to the respective policy
network; they could be ?nancial resources, person-
nel, technical installations, expert knowledge or
the like. Which resources are relevant within a pol-
icy network depends on the policy issue addressed in
the network. For the development of the European
Emissions Trading Directive, for example, the key
resource for the formation and continuity of the
policy network has been knowledge: knowledge
about emissions trading, knowledge about how it
works, technical knowledge about design features
of emissions trading schemes and about the poten-
tial (economic) implications of these, especially
knowledge gained from practical experiences with
emissions trading such as schemes that already
existed, e.g., the BP-internal scheme or the US sul-
phur trading scheme. It is argued below that those
individuals knowledgeable about emissions trading
provided a basis for the constitution of an (infor-
mal) issue-speci?c policy network in which the
European Emissions Trading Directive has been
developed.
The development of the European emissions trading
directive within a European policy network on
emissions trading
‘‘The European Commission alone has the for-
mal powers to initiate and draft legislation, which
includes the right to amend and withdraw its pro-
posal at any stage in the process, and it is the think
tank for new policies” (Marks & Hooghe, 2001, p.
12). Formally responsible for making policy propos-
als, the European Commission, more precisely DG
Environment, set the agenda for the EU ETS. In
June 1998 the Commission gave a strategy report
on EU climate policy to the European Parliament
and the Council of Ministers, in which it recom-
mended that an EU-wide emissions trading system
should be introduced for companies in 2005 in order
to be able to reach the Community’s reductions
commitments under the Kyoto Protocol (European
Commission, 1998). In May 1999 a second report
followed on Europe’s climate protection strategy,
in which the Commission announced a Green Paper
on emissions trading for the year 2000 (European
Commission, 1999, p. 15). Only with its publication
in March 2000 did public debate begin at the Euro-
pean level. Although some Member States, such as
Britain and Denmark, had already begun to discuss
or had implemented emissions trading systems of
their own, the in?uence of Member States at the
level of the EU had previously been extremely slight
(Vis, 2005, 2008). Thus, the Commission unreserv-
edly performed its role as think-tank for the Euro-
pean Union as DG Environment had anticipated
early on that Member States would need instru-
ments such as emissions trading to deliver on their
reduction targets agreed to in the Kyoto Protocol,
and it used not only its right to take initiatives but
also the ‘moral pressure’ of invoking these targets
and the EU’s demand that these should to a signif-
icant extent be achieved through domestic
measures.
However, when the European Union proposed
the development of an EU ETS in 1998, the mar-
ket-based climate policy instrument of emissions
trading was largely unknown and there was only lit-
tle experience available with the instrument. The
only large-scale emissions trading scheme to draw
conclusions from was the US sulphur dioxide cap-
and-trade programme, started in 1995. Neverthe-
less, as the EU’s greenhouse gas emissions trading
scheme was to be larger, more complex and was
to encompasses a variety of new features, the plans
of the European Commission were regarded as a
‘‘grand new policy experiment” (Kruger & Pizer,
2004). But also within DG Environment, responsi-
ble for designing the EU ETS within the EU Com-
mission, knowledge about emissions trading was
rather limited when some of its sta? members
started to think about proposing emissions trading
in Europe. Although, policy-makers from DG Envi-
ronment had started to be engaged in emissions
trading during the Kyoto negotiations they were
still in need to learn more about the instrument in
order to be able to design a European scheme –
especially after Ger Klaassen, who had studied the
US SO
2
trading scheme extensively (Klaassen,
1996), left the Commission in 1998 right when it
was decided to pursue the development of an EU
ETS. ‘‘Up and until Kyoto, ET [emissions trading]
was largely a territory little explored by the EU,
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 477
and knowledge was essentially limited to academic
circles and business that followed debates in the
USA” (Christiansen & Wettestad, 2003, p. 6).
It was the necessity for learning – the exchange of
knowledge – which was the point of origin for the
emergence of an (informal) policy network on emis-
sions trading as there were a number of people
knowledgeable on emissions trading outside DG
Environment. These individuals had either worked
on emissions trading theoretically or had gained
practical experiences with the instrument. On the
one hand, there were a number of scientists working
as consultants that had studied emissions trading
for some time – as well as some knowledgeable indi-
viduals from environmental NGOs – which played a
key role for designing the EU Emissions Trading
Directive (see Section ‘‘The role of consultancies
and environmental NGOs in the European policy
network on emissions trading”). On the other hand,
there were a number of companies that came for-
ward as supporters of emissions trading and there
were a few companies which were particularly
knowledgeable on the instrument – above all BP
who had already implemented an internal emissions
trading scheme (see Section ‘‘The role of the busi-
ness sector in the European policy network on emis-
sions trading”). On the basis of the European policy
network on emissions trading which emerged in the
framework of the learning processes between DG
Environment with experts from consultancies, envi-
ronmental NGOs and the business sector, sta?
members from DG Environment were able to take
up an important role as key players and acted as
policy entrepreneurs for the development of the
European Emissions Trading Directive (see Section
‘‘Policy entrepreneurs in the European policy net-
work on emissions trading”) – although the conduct
of negotiations after the proposal of a draft direc-
tive by the Commission is formally the responsibil-
ity of the Council Presidency.
The role of consultancies and environmental NGOs in
the European policy network on emissions trading
Since the beginning of the discussion on emis-
sions trading in the EU, scientists with recognised
expertise and competence were invited to co-operate
with the EU Commission. In autumn 1998, DG
Environment contacted experts from the Foundation
for Environmental Law and Development (FIELD)
to discuss a possible EU-wide emissions trading sys-
tem. At the same time, during the preparation of the
Green Paper, four studies were commissioned to
prepare and accompany the development of an
emissions trading system (Capros & Mantzos,
2000; CCAP, 1999; FIELD, 2000; IPTS, 2000). All
four were central for the EU Commission in order
to gain knowledge about the instrument of emis-
sions trading. Moreover, they had a lasting in?u-
ence on the composition of the Green Paper and
later on the design of the emissions trading
directive.
In the early stages of the discussion two studies –
the one conducted by the Institute for Prospective
Technological Studies (IPTS, 2000) and the one con-
ducted by Capros and Mantzos (2000) – were cru-
cial in providing DG Environment with knowledge
about the economic e?ects of a potential EU-wide
emissions trading scheme. Both studies helped DG
Environment to make the case for such a scheme
as it would lead to substantial economic gains
within the European Union compared to not intro-
ducing a trading scheme. While the IPTS study cal-
culated that ‘‘the overall EU abatement cost
reduction is of the order of 0.05% of the Union’s
2010 GDP [which] . . . would be equivalent to a
25% reduction in the cost burden” (IPTS, 2000, p.
4), Capros and Mantzos, calculated that ‘‘gains in
terms of total compliance costs, compared to the
Reference case, range from 20.7% to 34.0% depend-
ing on the emissions trading scheme” (Capros &
Mantzos, 2000, p. 15).
Regarding the design of the EU ETS, the Foun-
dation for Environmental Law and Development has
been one of the most in?uential actors. In the early
stages of the discussion they have had a major
in?uence on the decision of whether emission cer-
ti?cates should ?rst apply ‘downstream’ (to emit-
ters) or ‘upstream’ (to fuel suppliers or
producers). In contrast to the Center for Clean
Air Policy (CCAP) who proposed an ‘upstream’
model (CCAP, 1999) which was supported by envi-
ronmental groups and the European Parliament
(cf. CAN, 2000, p. 5; European Parliament, 2000,
p. 13), FIELD’s recommendation for a ‘down-
stream’ model – as already re?ected in the Green
Paper – prevailed (cf. FIELD, 2000, p. 23). While
both, FIELD and CCAP were indispensable in
the initial phase for ‘capacity-building’ in the Com-
mission (Vis, 2005), FIELD – then with CCAP as
subcontractor – became DG Environment’s main
consultant on emissions trading culminating in
the authoring of the ?rst draft of the EU Emis-
sions Trading Directive which was handed over
478 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
to DG Environment on 9 May 2001 (cf. FIELD,
2001, pp. 19–36). With only minor amendments
being made by DG Environment this draft was
then forwarded to the other Directorates-General
as the interservice consultation version of a pro-
posal for a directive on 31 May 2001. In order to
give an example for one of the design features pro-
posed by FIELD the intensively debated method
of allocation may be mentioned. For political rea-
sons FIELD recommended a ‘grandfathering’ prin-
ciple based on historical emission levels. While the
principle of free allocation prevailed, the lobbying
for a (partial) auctioning of certi?cates by the
EU Parliament and environmental NGOs resulted
in a compromise where Member States may volun-
tarily auction 5% in the ?rst trading period and
10% in the second period (European Commission,
2003a, Article 10).
Regarding knowledge about the environmental
e?ectiveness of a potential EU ETS experts from
environmental NGOs played an important role.
During the early stages of discussion, the main emis-
sions trading expert among the environmental
NGOs was Environmental Defense from the US
who not only came forward as a supporter of the
instrument during the discussions on the interna-
tional level in the framework of the UNFCCC nego-
tiations. As one of the earliest advocates of
emissions trading Environmental Defense soon
became one of the leading experts on this instru-
ment. On the one hand they have been part of the
proposal and development of the SO
2
emissions
trading scheme for utilities in the United States –
the only other large-scale emissions trading scheme
that existed before the EU ETS – and on the other
hand they have been asked by BP in 1997 to help
them designing a company-internal emissions trad-
ing scheme (cf. Section ‘‘The role of the business
sector in the European policy network on emissions
trading”) after successfully lobbying BPs CEO John
Browne to adopt such a scheme within the com-
pany. Due to their knowledge of how to design an
emissions trading scheme Environmental Defense
became BP’s most important advisor for preparing
and setting-up the internal scheme, even being a
member of the steering committee for the internal
scheme (Wriglesworth, 2008), and they ‘‘helped
key BP managers gain familiarity with the instru-
ment by leading workshops on trading for BP that
gave particular attention to topics such as monitor-
ing systems, trading rules and enforcement” (Victor
& House, 2006, p. 2102).
While during the agenda-setting process DG
Environment was in contact with Environmental
Defense as well as with other experts from the US
such as Brian McLean from the Environmental Pro-
tection Agency (EPA), responsible for the American
sulphur trading scheme as well as with other instiga-
tors of the SO
2
-scheme from the US such as Robert
N. Stavins from Resources for the Future – now at
Harvard University – or Denny Ellerman from the
Massachusetts Institute of Technology (Vis, 2008),
the European environmental NGOs entered the
scene at a somewhat later stage. When discussions
started on the European level they were very critical
towards a potential EU-wide emissions trading
scheme. When in January 1998, just a few months
after the 6th Conference of the Parties to the
UNFCCC in Kyoto, DG Environment invited sev-
eral environmental NGOs to sound them out about
emissions trading within the EU itself their opinion
was still coined by the environmental problems
associated with international emissions trading in
the Kyoto Protocol – primarily the possibility of
trading ‘hot air’ from countries of the former
USSR. However, this meeting proved to be crucial
for the environmental NGOs’ view on emissions
trading in Europe and they began to realise that
the envisaged company-based EU scheme would
not have the same kind of loopholes and leakage
problems as emissions trading in the Kyoto Proto-
col and may therefore be much more e?ective from
an environmental point of view (Singer, 2005;
Duwe, 2008). Since then, Brussels-based environ-
mental NGOs began to strongly work on how the
environmental e?ectiveness of an EU ETS could
be ensured, generating considerable expertise on this
issue. This was one of the reasons why DG Environ-
ment invited experts from the Climate Action Net-
work (CAN) Europe and from the World Wide
Fund for Nature (WWF) to take part in the consul-
tations on the design of the EU ETS within the
European Climate Change Programme (ECCP) (cf.
Section ‘‘The role of the business sector in the Euro-
pean policy network on emissions trading”).
The role of the business sector in the European policy
network on emissions trading
Section ‘‘The development of emissions trading
into a cornerstone of the European Union’s climate
policy” has already highlighted some national initia-
tives for emissions trading schemes and the support-
ing role that parts of the business sector have played
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 479
in these. Although the opinions about the establish-
ment of an EU-wide emissions trading system
among businesses were quite heterogeneous (Euro-
pean Commission, 2001b, pp. 2–4) and there clearly
was strong opposition from certain branches of
industry, large parts of the business community
were rather sympathetic to the introduction of such
a scheme (Christiansen & Wettestad, 2003, p. 9).
While some of the big European industry associates
such as the Union of Industrial and Employers’ Con-
federation of Europe (UNICE) and the Union of the
Electricity Industry (EURELECTRIC) generally
were in favour of the introduction of an emissions
trading scheme in Europe (Kyte, 2008; Wrigles-
worth, 2008), some actors from the business com-
munity, for instance the German chemical
company BASF along with the German chemical
industry association (VCI) and the Federation of
German Industries (BDI) as well as the European
Chemical Industry Council (CEFIC), adamantly
refused the introduction of emissions trading in
the EU (Schafhausen, 2008; Egenhofer, 2008;
Duwe, 2008; cf. Santarius & Braun, 2008).
To facilitate the exchange of knowledge about
emissions trading, the Commission organised a con-
sultation process in the framework of the working
group ‘Flexible Mechanisms’ of the European Cli-
mate Change Programme (ECCP). Between July
2000 and May 2001 ten meetings took place with
more than thirty representatives from Member
States, individual companies, business associations
and a few environmental NGOs to discuss various
design options for a European trading scheme
3
(e.g. grandfathering or auctioning, absolute or rela-
tive targets, voluntary or mandatory participation,
which gases to include). For DG Environment the
meetings of the ECCP proved to be important for
‘capacity-building’ in the Commission, enabling
ideas to be tried out and further developed. By
going through the process of the ECCP DG Envi-
ronment’s sta?s’ thoughts and understanding
improved a lot (Vis, 2005, 2008). Also, in September
2001, the Commission organised a consultation
meeting with representatives from the industry sec-
tor and environmental NGOs after which the Com-
mission concluded that a mandatory emissions
trading scheme appeared to be generally accepted.
All participants, including those from the business
sector, agreed that ‘‘emissions trading would o?er
a desirable additional instrument for achieving
reductions in emissions of greenhouse gases ful?ll-
ing the EU’s international commitments” (Euro-
pean Commission, 2001d, p. 2).
However, the positions on and the knowledge
about emissions trading of the participating busi-
ness representatives in these formalised information
exchanges were fairly di?use. While the discussions
themselves were much more necessary in order to
get the necessary support from stakeholders and
to organise majorities learning processes with an
in?uence on the design of the EU ETS were for
the most part con?ned to informal meetings of
DG Environment with those actors from the busi-
ness sector that were knowledgeable about emis-
sions trading. One of the most important actors
among the individual companies for the agenda-
setting for and during the negotiations on the
European scheme has been BP. In 1998, BP started
to experiment with emissions trading in order to
reach its internal emissions reduction target of
10% below 1990 level until 2012 as announced by
BP’s CEO Sir John Browne at a speech at Stanford
University in May 1997 (Browne, 1997). In the fall
of 1998 BP started a small pilot trading scheme
with 12 large business units, and in January 2000
BP ?nally implemented a large-scale company-
internal greenhouse gas emissions trading system
– in fact the ?rst global emissions trading system
– which encompassed all of BP’s business units
world-wide (Skjrseth & Skodvin, 2003; Victor &
House, 2006). Although Shell also started a small
internal emissions trading scheme in 2000, it was
the implementation of the BP scheme in particular
which constituted an increasingly powerful driver
in the EU’s emissions trading discussion (Vis,
2008; Zapfel & Vainio, 2002, p. 9) due to the tre-
mendous success of the programme in having
reached BP’s 10% reduction goal ‘‘seven years
ahead of schedule while generating $650 million
in new shareholder value” (Victor & House, 2006,
p. 2100). Especially the fact that BP saved more
money than emissions trading cost themselves was
a very positive message for DG Environment to
take away from BP’s internal scheme (Vis, 2008).
Regarding the agenda-setting for the EU ETS it
can be concluded that especially ‘‘the example of
the BP scheme, and the eloquent advocacy of car-
bon trading by BP sta?, were in?uential in laying
the political groundwork for the European carbon
market” (MacKenzie, 2007, p. 31).
3
see: Accessed 14.05.08.
480 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
Policy network theory has made clear that the
state which is responsible for the formulation and
implementation of public policies is increasingly
dependent on the business sector as it often lacks
the speci?c policy resources, particularly issue-spe-
ci?c expert knowledge, necessary for the develop-
ment of e?ective policy instruments. Therefore,
they frequently have to rely on complementary
resources of businesses which dispose of these
resources (Schneider, 2006, p. 124). And also in this
respect – not just for setting the agenda for emissions
trading in Europe – BP has been very important as
they had valuable knowledge about how to design
an emissions trading scheme due the practical expe-
riences they have made within their internal scheme.
For example, during the early phase of the discus-
sions on the design of the EU ETS BP – as well as
Shell – explained to DG Environment that for the
e?ectiveness of the scheme it was better to have abso-
lute instead of relative targets, the latter being
favoured by many companies and business associa-
tions at that time, and that is was better to have a
mandatory instead of a voluntary scheme (Wrigles-
worth, 2008; Hone, 2008). Yet, of utmost impor-
tance was BP’s substantial knowledge about the
monitoring, reporting and veri?cation of emissions
which in?uenced the Commission’s decision to start
the EU ETS with CO
2
only as BP had experienced
quite some di?culties with monitoring methane.
Furthermore, BP explained to DG Environment
the negative experiences they had made with grand-
fathering (von Meyerinck, 2008). While they both
knew that auctioning as a method of allocation
was not politically feasible right from the start as this
was opposed by most actors from the business sector
DG Environment has now put auctioning back on
the table to become the basic method of allocation
from 2013 onwards (European Commission, 2008).
However, BP and Shell were not the only in?uen-
tial actors from the business community. For exam-
ple, DG Environment had some good dialogue and
exchange with the Union of the Electricity Industry
(EURELECTRIC) (Vis, 2008) who not only came
forward as a supporter of the introduction of a
EU ETS (EURELECTRIC, 2000) but who were
also conducting a trading simulations programme
based on a ?exible, scenario-based model: the
Greenhouse Gas Emissions Trading Simulations
(GETS). The programme consisted of four stages
from GETS 1 in 1999 to GETS 4 in 2004 in order
to explore, gain experience and understand the
e?ects of di?erent design features within an emis-
sions trading scheme and to further develop the
assessment of an emissions trading market. While
GETS 1 and GETS 2 showed that emissions trading
was possible and that what many companies have
been frightened of, the trading part, was actually
very simple (Kyte, 2008), GETS 3 was carried out
speci?cally ‘‘to assess a number of Key Issues sur-
rounding the design, operation and implementation
of a European Emissions Trading (ET) Scheme”
(EURELECTRIC, 2002, p. 1).
Another important actor from the business sector
has been the Union of Industrial and Employers’ Con-
federation of Europe (UNICE) which in its reply to
the EU Green Paper on emissions trading generally
supported emissions trading as an instrument which
allows for companies to reach emissions reductions
in a ?exible and cost-e?ective way (UNICE, 2000).
As regards the discussion on the establishment of
the EU ETS one of the key ?gures from UNICE
has been Mike Wriglesworth from BP who also rep-
resented UNICE in the meetings with DG Environ-
ment in the framework of the European Climate
Change Programme (ECCP) and was able to intro-
duce the knowledge gained within BP’s internal emis-
sions trading scheme via this route as well – apart
from all the informal meetings he had with sta? from
DG Environment (Wriglesworth, 2008). In addition,
there has also been an energy-intensive company that
came out as an early supporter of emissions trading,
the French cement producer Lafarge who in 2000
had also started to experiment with projects designed
after criteria of the Clean Development Mechanism
(CDM) (Boyd, 2008). Interestingly, on the EU level
Lafarge was represented by its Head of Public A?airs
and Environment, Chris Boyd, who had formerly
been the assistant to Jim Currie, the director of DG
Environment from 1997–2001. Yet, Lafarge and
many other companies and business associations
that supported the introduction of an EU-wide emis-
sions trading scheme, such as the companies that par-
ticipated in the UK. emissions trading scheme, were
more important for winning widespread political
support for a EU ETS instead of being able to share
their technical and economic knowledge for design-
ing the directive in the same way as BP, Shell, EUR-
ELECTRIC and UNICE did.
Policy entrepreneurs in the European policy network
on emissions trading
As illustrated above, experts from consultancies,
environmental NGOs and the business sector did
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 481
have an in?uence on the development of the Euro-
pean Emissions Trading Directive. Due to the
knowledge they had on emissions trading – either
on a theoretical level or based on practical experi-
ences – they had been regularly contacted by DG
Environment, formally responsible for the develop-
ment of a Community emissions trading system,
thereby establishing an (informal) European policy
network on emissions trading. However, as DG
Environment was responsible for organising, and
most importantly, was able to dominate this Euro-
pean emissions trading policy network by adminis-
tering the learning processes taking place within
the network a few individuals of its personnel man-
aged to take up the role of policy entrepreneurs for
the development of the EU ETS well beyond DG
Environment’s formal responsibility to propose the
emissions trading scheme as a new instrument with
the EU’s climate policy mix.
A policy entrepreneur is a promoter who, on the
one hand, is capable of developing a policy idea
and, on the other, is able to win support for this idea
in the policy-making process. ‘‘Policy Entrepreneurs
advocate new ideas and develop proposals, de?ne
and reframe problems; specify policy alternatives;
broker the ideas among the many policy actors;
mobilize public opinion; help set the decision-mak-
ing agenda” (Roberts & King, 1991, p. 148). They
are individuals which intend to initiate dynamic pol-
icy change by engaging in a variety of strategies to
advance the successful adoption of policy ideas.
‘‘These include identifying problems, networking
in policy circles, shaping the terms of policy debates,
and building coalitions” (Mintrom, 1997, p. 739).
Policy entrepreneurs pursue the goal to leverage
the implementation of policy instruments by con-
vincing other actors involved in the policy-making
process from their ideas and by persuading critics
to rethink their position. It is the embeddedness of
involved actors into the structure of a policy net-
work that supports policy entrepreneurs in reaching
these goals. ‘‘Through networks, participants can
build alliances, share discourses and construct con-
sensual knowledge. From this basis, policy entrepre-
neurs can work to shape the terms of debate,
networking with members of a policy-making com-
munity, crafting arguments and ‘brokering’ their
ideas to potential political supporters and patrons”
(Stone, 2001, p. 15).
While the exchange of resources constitutes the
basis of a policy network and the possession of
resources allows for an individual to become part
of the policy network – as we have seen above – it
is the management of the exchange of resources in
a policy network which enables someone to become
a policy entrepreneur. The concept of policy entre-
preneurship reveals that individuals are important
actors and that, in the end, policies are being framed
and shaped by individuals or by groups of individu-
als that are able to most e?ectively make use of the
resources accumulated in a policy network.
As con?rmed by all interviewees the ones which
were able to act as policy entrepreneurs for the
development of the European Emissions Trading
Directive were most notably Jos Delbeke, Peter
Vis and from 2000 on also Peter Zapfel, from DG
Environment as the ones responsible for the devel-
opment of the directive. On the basis of all the tech-
nical and economic knowledge about emissions
trading these individuals have been able to organise
the necessary political majorities among all the rele-
vant stakeholders and among the Member States
and the European Parliament in order to get the
European Emissions Trading Directive adopted.
In the search for solutions and mediations, these
individuals repeatedly found ways to speed up the
policy process, to expand the room for manoeuvre
and to create new latitude for other actors. In this,
sta? at DG Environment bene?ted from the knowl-
edge they had gained in the framework of the policy
network between 1998 and 2001 (when the discus-
sion on the directive became public) in commission-
ing studies, organising stakeholder dialogues,
collaborating formally and informally with knowl-
edgeable actors from consultancies, environmental
NGOs and the business sector as well as working
internally on the directive. They were then able to
use these systematically acquired skills and know-
how to give them a strategic advantage in negotia-
tions with sta? from other Directorates-General,
with representatives of Member States in the Coun-
cil, the Committee of Permanent Representatives
(COREPER) and the Council working group as
well as with Members of the European Parliament
and miscellaneous stakeholders. The reason for
these policy entrepreneurs to be able to take up this
dominant role was largely based on the fact that
they had much more knowledge about emissions
trading as other participants in the negotiations
which led to a leap in con?dence (Vis, 2005).
Although the conduct of negotiations after the
proposal of a draft directive by the Commission is
formally the responsibility of the Council Presi-
dency, all interviewees have stated that DG Envi-
482 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
ronment maintained a guiding role throughout the
negotiations on the development of the EU ETS.
While Jos Delbeke was present at all the COREPER
meetings, Peter Vis attended all the sessions of the
Council working group which was important in
itself as presidencies change every half year while
Vis remained to be the Commission representative
on the ?le all the time (Vis, 2008). Moreover,
through Commissioner Wallstro¨ m, with whom they
kept up a close relationship, DG Environment also
had a dominant in?uence on the negotiations within
the Council of Ministers. The regular contact with
Jorge Moreira da Silva, rapporteur in the European
Parliament, was further used to anticipate di?er-
ences of opinion among the Council, Parliament
and Commission, to search for compromises and
to prepare processes of coordination (Vis, 2005,
2008). Moreira da Silva, who during the negotia-
tions in the EU Parliament became yet another
important policy entrepreneur, displayed a capacity
to build alliances and to put together a cross-party
consensus on the directive, covering both progres-
sive-environmentalist and conservative pro-business
fractions (Vis, 2005, 2008). Furthermore, due to the
speed of the negotiating process other actors had lit-
tle time to develop negotiating skills or to put for-
ward alternative conceptions as they simply lacked
the knowledge (Singer, 2005) which was concen-
trated in the hands of the policy entrepreneurs.
In its dealings with other Directorates-General
within the Commission, DG Environment was able
to take such advantage of its superior knowledge
and argument – supported by the move of Peter
Zapfel, who had studied emissions trading at Har-
vard University, from DG Economic and Financial
A?airs to DG Environment in 2000 – that during
the interservice consultations the directive moved
essentially unchanged from the ?rst draft proposal
in May 2001 through the second draft proposal in
September to the third and ?nal proposal as pub-
lished on 23 October 2001 (European Commission,
2001a). Although a number of other directorates –
DG Enterprise and Industry, DG Competition,
DG Transport and Energy, DG Economic and
Financial A?airs and DG Internal Market and Ser-
vices – expressed their reservations about certain
points they were not able to assert themselves due
to the head start in knowledge DG Environment
had (Vis, 2008) based on the studies they had com-
missioned and all the discussions they have had with
knowledgeable actors from consultancies, environ-
mental NGOs and the business sector. In addition,
DG Environment made tactical use of their head
start in knowledge in order to be able to steer the
policy-making process. For example they took the
other DGs completely by surprise when in May
2001 – just a few days after the ?nal meeting of
the ECCP working group – they already handed
over the ?rst draft proposal for the interservice con-
sultations (Ehrenberg, 2008).
It can be concluded that it was the advantage of
superior knowledge in the framework of the Euro-
pean policy network on emissions trading which
allowed for some sta? members of DG Environ-
ment to take up such a dominant role as policy
entrepreneur for the development of the European
Emissions Trading Directive. Also, the policy net-
work explains why some policy-makers from DG
Environment have been able to keep up this domi-
nant role after the proposal for a Community-wide
emissions trading scheme had been introduced. In
establishing the European emissions trading policy
network when they needed to gain knowledge about
emissions trading from experts from consultancies,
environmental NGOs and the business sector in
order to formulate the EU ETS proposal sta? mem-
bers from DG Environment have been able to
become the ‘managers’ of the exchange of knowl-
edge about emissions trading and were able to accu-
mulate the knowledge shared within the policy
network. A few individuals from DG Environment
were the ones who managed the policy network
allowing them to stay a lot more knowledgeable
than all other actors involved in the policy process,
especially when the o?cial role of leading the nego-
tiation process formally would have switched to the
Council Presidency.
Conclusion – knowledge is power revisited
Based on the fact that policy-making in the EU is
embedded into a multi-level governance system
which encourages the emergence of policy networks
it has been elucidated how the European emissions
trading scheme has been established in the frame-
work of an (informal) policy network built on the
sharing of knowledge about emissions trading. It
is argued that the European Emissions Trading
Directive has been developed by an issue-speci?c
policy network: the European policy network on
emissions trading which has been established by
sta? members from DG Environment, including
experts from consultancies, environmental NGOs
and the business sector. It is concluded that the
M. Braun / Accounting, Organizations and Society 34 (2009) 469–487 483
sharing of knowledge about emissions trading and
design options for emissions trading schemes was
the key momentum for the establishment and conti-
nuity of this policy network and that the possession
of knowledge and the control over the knowledge
being shared were the main factors to allow for a
few sta? members from DG Environment to play
a dominant role as policy entrepreneurs for the
development of the emissions trading directive, even
beyond their formal role of just proposing the
scheme as representatives from the EU
Commission.
From a sociological perspective this ties up with
the debate on the relationship between knowledge
and power going back to Francis Bacon’s famous
aphorism ‘scientia potentia est’, these days usually
translated as ‘‘knowledge is power”, from his book
Meditationes Sacrae (1597). The analysis above
clearly has shown that ‘‘knowledge and information
are a resource that identi?es the powerful from the
non-powerful” (Bennett & Howlett, 1992, p. 290)
as the EU ETS has largely been established by a
few e?ective policy entrepreneurs from DG Envi-
ronment on the basis of the knowledge they gained
from – consciously or unconsciously – managing the
European policy network on emissions trading.
Most likely, they would not have been able to take
up this dominant role if they had not had the possi-
bility to always be a step ahead as regards knowl-
edge about emissions trading compared to other,
formally more powerful participants in the negotia-
tion process.
This puts the acquisition of knowledge at the cen-
tre of modern policy-making. Yet, in policy-making
processes knowledge is not per se linked with power.
Power depends on the kind of knowledge someone
disposes of as Foucault (1991) has already discussed
in his work on ‘governmentality’, a term which
points to the notion that power – in the sense of
governmental power – is not essentially limited to
the state and that power is increasingly dependent
on the availability of a speci?c kind of knowledge.
In this regard, Crozier and Friedberg (1993, p.
50f). have identi?ed expert knowledge as an impor-
tant source of power for an actor in a network.
Powerful is someone who has issue-speci?c knowl-
edge relevant for a certain policy, in this case knowl-
edge about emissions trading, in particular
knowledge about how it works and knowledge
about the potential (economic) impacts of di?erent
design features of emissions trading schemes. Those
who had such knowledge – experts from consultan-
cies, environmental NGOs, individual companies
and business associations – were able to in?uence
the policy-making process in the framework of the
European policy network on emissions trading
which they were a part of as knowledgeable individ-
uals. But in the end, the most knowledgeable indi-
viduals were also the most powerful ones: some
sta? members from DG Environment that were able
to take up the role of policy entrepreneurs based on
their role as ‘managers of knowledge generation’
within the European policy network on emissions
trading.
However, it requires further research whether
these conclusions also apply to policy-making pro-
cesses regarding the development of other policy
instruments. Is it really the existence of an issue-spe-
ci?c policy network which enables some members of
the network to become policy entrepreneurs, and is
this based on being more knowledgeable than other
members of the network? And could it have been
that other non-state members of the policy network
instead of sta? members from DG Environment
could have taken up the role as policy entrepreneurs
or is the condition to take up a dominant role rather
attached to the hierarchy criterion of being a repre-
sentative from the state and of being formally
responsible for steering the policy-making process?
These questions may be pulled together with the
theoretical discussion if governance processes in
multi-level systems can better be grasped by the con-
cept of hierarchy, market or network (Mayntz,
1996; Powell, 1990; Weyer, 2000). It seems as that
knowledge might serve as an important explanan-
dum in this debate.
List of conducted interviews
4
Boyd, Christopher (2008), Lafarge, International
Emissions Trading Association (IETA), Euro-
pean Round Table of Industrialists (ERT), 26
March 2008.
Brockhagen, Dietrich (2008), Federal Ministry
for the Environment, Nature Conservation and
Nuclear Safety, 29 February 2008.
Davies, Chris (2008), European Parliament, 5
March 2008.
Duwe, Matthias (2008), Climate Action Network
(CAN) Europe, 10 March 2008.
4
Some of the interviewees have moved to di?erent positions in
the meantime. A?liations given below are the ones the intervie-
wees have had during the establishment of the EU ETS.
484 M. Braun / Accounting, Organizations and Society 34 (2009) 469–487
Egenhofer, Christian (2008), Centre for Euro-
pean Policy Studies (CEPS), 11 March 2008.
Ehrenberg, Joachim (2008), EU Commission,
DG Enterprise and Industry, 7 March 2008.
Forth, Thomas (2004), Federal Ministry for the
Environment, Nature Conservation and Nuclear
Safety, 18 March 2004.
Gu¨ nther, Regine (2004), World Wide Fund for
Nature (WWF), 18 March 2004.
Hayden, Mark (2008), EU Commission, DG
Economic and Financial A?airs, 11 March 2008.
Hein, Joachim (2008), Federation of German
Industries (BDI), 27 February 2008.
Hone, David (2008), Shell International, Interna-
tional Emissions Trading Association, 16 April
2008.
Kyte, Bill (2008), Powergen, EURELECTRIC,
UK Emissions Trading Group, 8 April 2008.
Schafhausen, Franzjosef (2008), Federal Ministry
for the Environment, Nature Conservation and
Nuclear Safety, 27 February 2008.
Singer, Stephan (2005), World Wide Fund for
Nature (WWF), 18 February 2005.
Ste?e, Frank (2005), Green Parliamentary Group
in the German Bundestag, 2 March 2005.
Vis, Peter (2005), EU Commission, DG Environ-
ment, 18 February 2005.
Vis, Peter (2008), EU Commission, DG Environ-
ment, 7 March 2008.
von Meyerinck, Lutz (2008), Deutsche BP, 18
March 2008.
Wriglesworth, Michael (2008), BP, Union of
Industrial and Employers’ Confederation of Eur-
ope (UNICE), European Roundtable of Indus-
trialists (ERT), European Chemical Industry
Council (CEFIC), Centre for European Policy
Studies (CEPS), 6 March 2008.
Acknowledgement
An earlier version of this paper was presented to
the workshop ‘Carbon Markets in Social Science
Perspective’ at the Institute of Advanced Study,
Durham University, on 7 November 2007.
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