The European Union Emissions Trading System was the first large greenhouse gas emissions
trading scheme in the world, and is still the largest. It was launched in 2005 as a major pillar of
European climate policy.
The Emissions Trading System is a ‘cap and trade’ mechanism. The ‘cap’ is the maximum amount of all greenhouse gas emissions that can be emitted by all participating industry sectors. This ‘cap’ is reduced every year by a ‘linear reduction factor.’
Within this ‘cap’, installations are permitted to either keep ‘allowances’ for next year or to sell them on to other companies that may need to emit more.
The original objective of the Emissions Trading System was to achieve agreed emissions reduction targets in a 'cost-effective and economically efficient manner'. This is done using the carbon price resulting from the interaction of supply and demand for ‘emissions allowances’.
The EU Emissions Trading System covers around 11,000 installations in power generation and industry as well as the aviation sector. These installations are together responsible for 45% of the EU’s greenhouse gas emissions. Emissions from buildings, agriculture, transport and waste are outside the Emissions Trading System’s scope.
The European steel industry is committed to contributing responsibly to the achievement of the EU’s long-term climate objectives in line with the ambition of the Paris Agreement.
Brussels, 5 March 2020 – The EU has published its draft climate law implementing the principles of the Green Deal presented at the end of 2019. The steel sector has made great strides in its efforts to reduce emissions, but needs the right framework to deliver upon the ambition set out in the EU’s plans.
Priorities to transition the EU to carbon-neutrality and circularity