What is the EU ETS?
The EU Emissions Trading Scheme (EU ETS) is one of the key policies introduced by the European Union to help meet the EU’s greenhouse gas emissions reduction target of 8% below 1990 levels under the Kyoto Protocol.
The scheme is divided into phases for which Member States must develop a National Allocation Plan (NAP) approved by the European Commission. These plans must set an overall ‘cap’ on the total amount of emissions allowed from all the installations covered by the scheme. This is converted to allowances - 1 allowance equals 1 tonne CO2. The allowances are then distributed by Member States to installations in the scheme.
Installations covered by the Scheme are required to monitor and report their emissions. At the end of each year they are required to surrender allowances to account for their installation’s actual emissions. They may use all or part of their allocation and have the flexibility to buy additional allowances or to sell any surplus allowances generated from reducing their emissions below their allocation.
Installations are covered by the EU ETS on the basis of CO2 emitting activities they carry out, and cover heavy industries such as:
- Electricity generation;
- Iron & steel;
- Mineral processing industries such as cement manufacture;
- Pulp and paper processing industries.
Page last modified: 17 September 2007
Page published: 8 September 2003