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.
Industrial energy consumers urge EU leaders to swiftly act against unbearably
high energy prices
Brussels, 16 December 2021 – Continued prohibitive energy prices coupled with skyrocketing carbon prices, above 80 euros, risk derailing the ambitious decarbonisation plans of the steel industry. EU Leaders must act swiftly and ensure climate goals are met cost effectively, while preserving the viability of strategic industrial sectors. This is the warning of the European Steel Association (EUROFER) on the occasion of the European Council and ahead of the Environment Council of next week.
Immediate support is needed to address skyrocketing power prices, as well as structural measures securing affordable low carbon energy to meet the EU Green Deal's objectives