The EU emissions trading system (EU ETS) is a cornerstone of the EU's policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. It is the world's first major carbon market and remains the biggest one.
The EU ETS works on the 'cap and trade' principle.
A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall.
Within the cap, companies receive or buy emission allowances which they can trade with one another as needed.
After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.
Trading brings flexibility that ensures emissions are cut where it costs least to do so. A robust carbon price also promotes investment in clean, low-carbon technologies.
The EU ETS has proved that putting a price on carbon and trading in it can work. Emissions from installations in the system are falling as intended :
In 2020, emissions from sectors covered by the system will be 21% lower than in 2005.
In 2030, under the revised system they will be 43% lower.
As of 2014, the EU ETS covered approximately 13,500 stationary installations in the electric utility and major industrial sectors and all domestic airline emissions in the EU’s twenty-eight member states
The EU ETS works on the 'cap and trade' principle.
A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall.
Within the cap, companies receive or buy emission allowances which they can trade with one another as needed.
After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.
Trading brings flexibility that ensures emissions are cut where it costs least to do so. A robust carbon price also promotes investment in clean, low-carbon technologies.
The EU ETS has proved that putting a price on carbon and trading in it can work. Emissions from installations in the system are falling as intended :
In 2020, emissions from sectors covered by the system will be 21% lower than in 2005.
In 2030, under the revised system they will be 43% lower.
As of 2014, the EU ETS covered approximately 13,500 stationary installations in the electric utility and major industrial sectors and all domestic airline emissions in the EU’s twenty-eight member states
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