Making hay with the ETS: Legal, regulatory, and policy intersections in the integration of agriculture into the European Union Emissions Trading Scheme

With its European Green Deal and the new European Climate Law, the EU has given itself a daunting challenge and a legal obligation to achieve a net 55% reduction of greenhouse gases by 2030 and full climate neutrality by 2050. In order to do this, it has to figure out not only how but also where such large reductions can be made. While the EU has a robust mechanism in its regulatory toolbox for achieving emissions reductions in the form of its Emissions Trading System, at the present moment the ETS does not cover the agricultural sector, which currently amounts to a full 10% of its total greenhouse gas emissions.
To date, the EU has been troublingly unsuccessful at effectively reducing its agricultural emissions, though, and this will need to change in order for it to meet its goals by 2030 and 2050. Although the European Commission has not (yet) announced any formal intention to include agriculture into the ETS, it is worth evaluating the prospect of it doing so given the urgency of the present moment and the pressure on the EU to carefully consider any emissions reduction option that is available to it.
This paper, therefore, contributes to this discussion by assessing the legal prospect of incorporating the EU’s agricultural sector into its ETS. Its primary argument is that while doing so will require complex economic calculations along with some difficult political decision-making, from a legal perspective it would be very feasible and could even bring a number of regulatory and policy ‘win-wins’ in its wake. The EU’s broader legal framework would be quite permissive of it if it does not upset the internal marketplace, and finding the right way to do it could bring the EU’s emissions reduction, agricultural and environmental policy goals into closer alignment in ways that its current policy and regulatory frames do not. Furthermore, the ETS was intentionally designed to be a flexible mechanism and it has already demonstrated its ability to be re-tooled to address different economic sectors and new gases, and there is little indication that modifying it to apply to agricultural emissions would be beyond its capacity.