Emission trading

The EU Emission Trading Scheme (EU ETS) has been developed as a cap and trade system aiming to reduce greenhouse gas emissions among large emitters within Europe. Its objective is to ensure that greenhouse gas emissions from the sectors covered are cut at least cost to the economy.

Allowances traded in the EU ETS are held in accounts in national electronic registries. All national registries are overseen by independent transaction logs at both EEA (Community Independent Transaction Log - CITL) and UN (International Transaction Log - ITL) levels. Each company with a commitment and any person interested in buying or selling allowances must open an account in a national registry. The CITL records the issuance, transfer, cancellation, retirement and banking of allowances that take place in the registry.

The current EU ETS covers energy-intensive activities which commonly generate high levels of CO₂ emissions, including:

• power stations and other combustion plants
• oil refineries
• coke ovens
• iron and steel plants
• factories making cement, glass, lime, brick, ceramics, pulp and paper.

For the trading period 2008-2012, over 10,000 installations across the 27 EU Member States and the three EFTA States are required annually to surrender emission allowances equal to their emissions in the previous year.

One core task in the run-up to the implementation of the current EU ETS was the elaboration of national allocation plans (NAPs) by EEA States. National allocation plans drawn up by each EEA State set out how each State intends to allocate CO₂ emissions allowances under the EU ETS. In their plans, EEA States are required to fix the total number of allowances to be created in their territory for the trading period at issue and the allocation made to each installation covered by the scheme as well as the limit of use of credits from Kyoto's project-based mechanisms for compliance.

The Authority is responsible for assessing the NAPs notified by the EFTA States. It assessed the NAPs notified by Liechtenstein and Norway for the trading period 2008‑2012. Iceland was not required to submit a NAP for that period, because Icelandic installations falling within the scope of the EU ETS could be exempted.

The EU ETS has already been subject to two main amendments intended to widen its scope and increase harmonisation and fairness, in particular through the determination of EU-wide rules on allocation of allowances free of charge.

From 2012, aviation activities will be included in the EU ETS pursuant to Directive 2008/101/EC.

The EU ETS for the next trading period, as revised by Directive 2009/29/EC, will be strengthened and expanded. From 2013, its scope will be extended to include other sectors and greenhouse gases and the capture, transport and geological storage (CCS) of all greenhouse gas emissions will be covered.

Relevant links

• European Climate Change Programme
• European Commission - Emission Trading System (EU ETS)
• Community Independent Transaction Log
• Icelandic Ministry for the Environment
• Liechtenstein Office of Environmental Protection – Emission Trading Portal
• Norwegian Ministry of the Environment
• Norway's Emission Trading Registry
• United Nations Framework Convention on Climate Change (UNFCCC)
• Intergovernmental Panel on Climate Change (IPCC)