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.
Brussels, 15 September 2021 – In her second State of the Union address, European Commission President Ursula von der Leyen set out the Green Deal as a major achievement and a cornerstone for the future of the EU. The steel industry is a world leader in decarbonisation and innovation, and has the ambition of reducing its emissions by 55% by 2030 compared to 1990. But it will be successful only if the Fit for 55 Package puts the right conditions and incentives in place.
Neutrality towards technology choices, acknowledgment of transition timing and framework conditions needed as well as consistency with EU climate legislation are key factors for success, EUROFER webinar points out
Brussels, 15 July 2021 – The Fit for 55 package, released yesterday by the European Commission, needs a more finely balanced approach to enable the decarbonisation of EU steel industry whilst avoiding the leakage of production and CO2 emissions outside the EU.