This paper investigates the European Unions Emissions Trading System (EU ETS), which is often presented as the cornerstone of the EUs strategy for fighting climate change. The paper analyses the basic design of the scheme, its workings during the first trading period (200507), the adjustments made for the second trading period (200812) and its performance during the years 2008 and 2009. It also discusses the European Commissions (EC) proposal to revise the EU ETS for the period 201320 and the agreement reached. The paper offers a critical assessment of the EU ETS from a value-theoretic and class-based standpoint, challenging mainstream accounts. Following the consultation and co-decision processes that preceded the adoption of the EU ETS Directive and its amendment, one reaches the conclusion that the EU ETS has become the flagship of the European climate change programme because it is more conducive to the dominant EU industrial capitals that compete with non-EU capitals under strenuous international market conditions. The limited environmental effectiveness, the windfall profits and distributional injustice that characterise the scheme from its start are pitfalls generated from the embeddedness of the scheme in the EU capitalist economies.
