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 current economic context reinforces the case for a watertight CBAM with a cautious free allocation phase out and a tangible export solution
Brussels, 01 July 2022 – The upcoming negotiations on the EU Emissions Trading System and the Carbon Border Adjustment Mechanism need to enable industry’s decarbonisation and make the green transition a true success story. EUROFER, which represents the EU steel industry providing 310,000 direct jobs and 2,2 million indirect jobs, calls upon the EU institutions to work for a balanced compromise in the final text. The Council, with the adoption of its position, made progress towards a smoother phase out of free allocations for industries in transition to carbon neutrality, but several issues still need to be fixed.
Brussels, 22 June 2022 – Despite some acknowledgment of industry’s challenges in addressing the green transition, the outcome of today’s plenary vote of the European Parliament will require further work in the next steps of the legislative process to align the provisions to the deployment of the EU steel industry’s ambitious low carbon projects. EUROFER reiterates its call to EU policy makers for an open, fact-based discussion, also in light of the evolving geopolitical and energetic context, in order to speed up decarbonisation and secure the EU’s strategic autonomy.
Several myths or misunderstandings about the role and functioning of the EU ETS abound in discussions about this central EU climate policy.
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