The Design and Effects of a Tradable Fuel Permit System

The Design and Effects of a Tradable Fuel Permit System


M Keppens, E Crals, Limburg University, BE; L Vereeck, University of Maastricht, NL



Under the Kyoto Protocol, trading of emission permits is proposed to reduce overall greenhouse gases emissions. Starting from 2008, a worldwide trading program will be operational. Recently, the European parliament took legislative steps to set-up a greenhouse gas emissions allowance trading system for energy intensive sectors within the European Union (EU) member states in 2005. Later on, this program will possible be extended to other sectors such as the transport sector.

This is not surprisingly since road transport is the fastest growing producer of greenhouse gases in the EU. At present, voluntary agreements with the automobile industry are the cornerstone of the EU policy to tackle this problem. Since it is expected that these measures will not be sufficient to realize the agreed reduction, other policy instruments should be applied.

This paper explores the possibilities to implement a permit program in private road transport, which includes an active involvement of households and transport industry. At present, there are no examples of allocation of permits to households. Although the permit system does not reduce emissions of itself, it provides a direct incentive to achieve a fixed level of emissions, at the lowest cost and assuring flexibility amongst the market players.


Association for European Transport