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.
We need effective enabling policies for a Green Deal on Steel that sets out a clear action plan for the recovery of the steel industry and boosts our CO2 reduction efforts - serving as a blueprint for Europe.
'We are ready - are you? Making a success of the EU Green Deal' summarises the main points from EUROFER's 'A Green Deal on Steel'.
The European Commission published, on 21 September 2020, its revision of the EU ETS State Aid guidelines for the compensation of indirect carbon costs for the period 2021-2030.