Commodity or Propriety? Unauthorised Transfer of Intangible Entitlements in the EU Emissions Trading System
| Author | Bonnie Holligan |
| DOI | http://doi.org/10.1111/1468-2230.12535 |
| Date | 01 September 2020 |
| Published date | 01 September 2020 |
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Modern Law Review
DOI: 10.1111/1468-2230.12535
Commodity or Propriety? Unauthorised Transfer
of Intangible Entitlements in the EU Emissions
Trading System
Bonnie Holligan∗
This article argues that the law governing transfer of allowanceswithin the EU Emissions Trading
System (EU ETS) should place greater weight upon transactional (and environmental) integrity,
even over market liquidity. More broadly, it reflects on the role played by registries in sharing
or concealing information about the material world. Although property rules enable market
activity through the creation of an abstract carbon commodity, they must also link past to future
entitlements in a just way. In emissions trading markets,justice in pr ivatetransactions is intimately
connected to public questions of environmental justice.The relevant EU Regulation prior itises
facility of transfer over protection of existing holders, insulating registered entitlements from
prior proprietary claims. This approach ignores the important connections between history,
integrity and responsibility in both public and private spheres. A preferable response would be
to distinguish between transactional and register error, protecting against register mistakes, but
not transactional defects.
INTRODUCTION
Emissions trading schemes inhabit an uneasy position between public and
private law. Approached as markets, their foundations are the private law in-
stitutions of contract and property, but their role in allocating environmental
responsibility raises public concerns around environmental integrity, adminis-
trative legitimacy and social and environmental justice. The process by which
carbon and other pollutants are commodified1presents many questions for
property scholars; this article considers allowances created under the EU Emis-
sions Trading System (EU ETS)2as, at least in the understanding of English
law, a novel form of intangible property. Drawing on perspectives from prop-
erty theory and doctrine, as well as critical geographical scholarship, it claims
that the public dimensions of emissions trading necessitate a conceptual shift
∗Lecturer in Property Law, Universityof Sussex. I am g rateful to ProfessorAlison Clarke and Professor
Donald McGillivray for their comments on earlier versions of this piece, to the organisers of the
Modern Studies in Property Law Publication Workshop held at Queens’ College, Cambridge in
April 2017 and to the anonymous peer reviewers for their comments. All errors are my own. Unless
otherwise stated, all URLs were last accessed 21 January 2020.
1 The concept of ‘commodification’ is used here in the Marxian sense detailed by N. Castree,
‘Commodifying What Nature?’ (2003) 27 Progress in Human Geography 273.
2 The EU ETS was created under Directive2003/87/EC establishing a scheme for greenhouse gas
emission allowance trading within the Community and amending Council Directive 96/61/EC
OJ L 275/32 (Emissions Trading Directive).
C2020 The Author. The Modern Law Review published by John Wiley& Sons Ltd on behalf of Moder n LawReview Limited.
(2020) 83(5) MLR 979–1007
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and
reproduction in any medium, providedthe orig inal workis properly cited.
Commodity or Propriety?
in doctrinal norms and values. In particular, the rules governing transfer of
allowances must foster not only justice between individual market participants,
but also political and ecological accountability.
The article is part of a growing body of research analysing the role of property
in emissions trading markets.3It explores some of the normative contradictions
that transfer rules must manage, in particular the perceived tension between
market liquidity and environmental and transactional integrity. The current le-
gal construction of allowances as fungible property that must circulate without
restriction is a fragile edifice that often operates to obscure conflict rather than
resolve it. Questions of territory and sovereignty constantly threaten the legal
homogeneity of allowances, for example in the negotiations around the depar-
ture of the United Kingdom from the European Union.4Moreover, intangible
property rights such as emissions allowances cannot be understood separately
from the technologies that create and record them; the design of electronic
registration systems is closely connected to legal paradigms of transfer.5As pro-
cesses of market exchange compress space and time, the article points to the
importance of maintaining property rules that recognise, rather than suppress,
the connection with the human and material.
The EU ETS has its origins in a more general policy shift towards the
use of market mechanisms to solve environmental problems such as climate
change.6The construction of new forms of property right plays a critical
role in the establishment of successful trading schemes.7Notwithstanding the
legislative silence regarding the legal nature of emissions allowances in the
EU ETS (EUAs), it appears meaningful, in the English context at least, to
talk of entitlement to EUAs as being proprietary in nature. Discussion in the
article centres on reforms made in 2011 to the registration of allowances that
prioritise f acility of transfer over protection of existing holders. These reforms,
it is argued, protect the homogeneity of allowances at the expense of values
3 See in particular K.F.K. Low and J. Lin, ‘Carbon Credits as EU Like It: Property, Immunity,
TragiCO2medy?’ (2015) 27 Journal of Environmental Law 377; S. Manea, The Instrumentalization
of Property: Legal Interests in the EU Emissions TradingSystem (The Hague: Wolters Kluwer, 2014)
and C. Godt (ed), Regulatory Property Rights: The Transforming Notion of Property in Transnational
Business Regulation (Leiden: Brill, 2016) esp chs 1 and 2 by C. Godt and M. Colangelo.
4 Preparations have included plans to distinguish allowances originating in the United Kingdom
from other allowances if not surrendered before the exit date: Commission Regulation (EU)
2018/208 of 12 February 2018 amending Regulation (EU) No 389/2013 establishing a Union
Registry and The Greenhouse Gas Emissions Trading Scheme (Amendment) Regulations 2017,
SI 2017/1207. From April 2019, the UK has been unable to issue allowances: Commission De-
cision of 17 December 2018 on instructing the central administrator to temporarily suspend the
acceptance by the European Union Transaction Log of relevant processes for the United King-
dom relating to free allocation, auctioning and the exchange of international credits (C(2018)
8707).
5 The r isk of ‘governance by algorithm’ displacing property norms has been highlighted, in a
different context, by P. Paech, ‘Securities, intermediation and the blockchain: an inevitable
choice between liquidity and legal certainty?’ (2016) 21 Uniform Law Review 612.
6 For analysis of these shifts in regulatory approaches and actors, see N. Gunningham, ‘Environ-
ment Law, Regulation and Governance: Shifting Architectures’(2009) 21 Journal of E nvironmental
Law 179; C.T. Reid and W. Nsoh, The Privatisation of Biodiversity? New Approaches to Nature Con-
servation Law (Cheltenham: Edward Elgar, 2016) ch 1.
7 See for example Reid and Nsoh, ibid, para 2.9; Manea, n 3 above, ch 6.
980 C2020 The Author. The Modern Law Review published by John Wiley& Sons Ltd on behalf of Moder n LawReview Limited.
(2020) 83(5) MLR 979–1007
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