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, 18 December 2022 – On Saturday night EU institutions agreed on the revision of the Emissions Trading System following an earlier agreement on the Carbon Border Adjustment Mechanism. The final text sets new rules for the upcoming years until 2030, which constitute a critical period for the uptake of low carbon technologies at industrial scale in the steel sector. While the ETS revision introduces some stronger incentives for the uptake of new technologies to decarbonise industry, a pre-defined free allocation phase-out trajectory risks wiping out a large part of EU steel exports worth €45 billion if no concrete export solution is found before 2026, warns the European Steel Association.
Brussels, 14 December 2022 – The future of European industry is at stake, threatened by an unresolved energy crisis, impacted by unilateral decarbonisation costs, and undermined by trading partners’ new regulatory frameworks to massively subsidise local investment with more predictable measures. In the coming days, EU leaders will make fundamental decisions for Europe's industrial future. Against the backdrop of the EU energy crisis and the US Inflation Reduction Act, the EU must urgently develop and implement an industrial policy mainstreaming industrial competitiveness in all policy fields and take decisive action to enable the green transition as well as to enhance the resilience of industry. This is a unique opportunity for the EU to remain a frontrunner in climate policy, says the European Steel Association.
Joint letter of the energy intensive industries to the EU Presidency
Several myths or misunderstandings about the role and functioning of the EU ETS abound in discussions about this central EU climate policy.
WTO compliance, transition period, solution for exports, anticircumvention measures: our collection of impact assessments and policy documents
The European Steel Association (EUROFER)
172 Avenue de Cortenbergh
1000 Brussels
Belgium
Email: mail@eurofer.eu
Phone: +32 (0) 2 738 79 20
