1 THE KYOTO PROTOCOL’S EMISSIONS TRADING SYSTEM: An EU-US Environmental Flip-Flop Chad Damro and Pilar Luaces-Méndez Introduction : The 1997 Kyoto protocol on climate change continues to be a target of pointed praise and condemnation from a variety of interests and actors in domestic and international environmental policy-making. As a result, the Kyoto summit has been the subject of close scrutiny by a diverse group of scholars. 1 However, most of this literature overlooks interesting questions related to the political dynamics surrounding the emergence and implementation of a new environmental policy instrument (NEPI) at the international level—a greenhouse gas emissions trading system. 2 While the eleven-day Kyoto summit was an extremely well-attended international conference, it is particularly productive to analyze the negotiations in terms of the conflicting positions of two central actors, the European Union (EU) and the United States of America (US). Prior to Kyoto, the US promoted this NEPI while the EU opposed it. After Kyoto, US support surprisingly waned for the emissions trading system while the EU began to design, in earnest, a domestic emissions trading system. Such a “flip-flop” in positions generates two interesting questions related to the NEPI: 1) why did the EU and US flip-flop positions after the Kyoto Summit, and 2) to what extent do post-conference discussions reflect this flip- flop? Investigating these questions may provide specific insights into the domestic politics and international negotiations that surround the complex adoption and implementation of similar NEPIs. To do so, the current study employs a detailed analysis of primary documents on EU and US climate change policies. Central to the analysis, two opposing policy approaches are identified at Kyoto: US free- market environmentalism and EU regulatory environmentalism. Despite these different approaches, the US and EU were able to reach agreement, which significantly facilitated the signing of the Kyoto Protocol. While the EU initially opposed the inclusion of this particular NEPI in the final agreement, the Kyoto Protocol now appears to be a significant external source of policy innovation in the Union. This study proceeds in the following manner. First, it describes the origins and modalities of the international emissions trading system. Second, the study discusses the opposing US and EU positions during the Kyoto negotiations based on their respective approaches to international environmental policy. Third, the study briefly addresses the EU-US flip- flop at the Kyoto Summit. Fourth, the study investigates the post-summit 1 For example, see Banks (2000), Dawson (1999), Dobes (1999), Grubb et al. (1999), Worika et al. (1999), Johnston (1998), Missfeldt (1998), Schneider (1998), Trexler and Kosloff (1998), and Yamin (1998). 2 For useful discussions of NEPIs in Europe, see Jordan et al. (2000) and Golub (1998).