EU Emission Trading System

Under EU ETS, industries can trade carbon dioxide allowances in order to maintain an overall balance in GHG emissions

Industry

Copyright John Doheny

Under EU ETS, industries can trade carbon dioxide allowances in order to maintain an overall balance in GHG emissions
Copyright John Doheny

Under EU ETS, industries can trade carbon dioxide allowances in order to maintain an overall balance in GHG emissions

Industry

Copyright John Doheny

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The European Union Emissions Trading System (EU ETS) was introduced in 2005 to try to combat high GHG emission levels within the EU. It is a major pillar of EU climate policy.

Under the scheme, carbon dioxide emissions from large industries were capped, but trading of excess carbon dioxide allowances between industries was permitted. Any industry or company that is unable to keep within the tonnage limit of their carbon dioxide allowances has two options available to them:

1. the company can buy the excess allowances of another company to achieve their targets.
   
   or
    

2. the company can invest in clean energy technology development in other regions of the world, and retain the GHG reductions achieved towards their own targets.

It was hoped that this would allow emission reductions to take place in a cost effective manner, thereby providing economic incentives for achieving target reductions. For the first time, the EU ETS put a monetary value on a tonne of carbon dioxide.