Member access
CO2 ETS

Greenhouse gas emission allowance trading scheme

BACKGROUND

The European Union (EU) is establishing a scheme for greenhouse gas emission allowamce trading for the cost-effective reduction of such emissions. This scheme should enable the EU and the Member States to meet the commitments to reduce greenhouse gas emissions made in the context of the Kyoto Protocol.The adoption of the Kyoto Protocol by the Community and its Member States in 2002 commits them to reducing their greenhouse gas emissions by 8 % in relation to 1990 levels between 2008 and 2012. This Directive, by establishing a market in greenhouse gas emission allowances, will help the EU and its Member States to effectively meet the commitments made in the framework of the Kyoto Protocol while safeguarding economic development and employment.

In March 2007, the European Council approved the target of reducing greenhouse gas emissions by 30 % by 2020 compared to 1990 levels, as a contribution with a view to an agreement after 2012, on condition that other developed countries undertake to set comparable reduction targets, depending on their respective responsibilities and capacities. The EU is strongly committed to reducing its greenhouse gas emissions by at least 20 % by 2020 compared to 1990 levels. In October 2009, the European Council supported the objective of reducing emissions by 80 to 95 % by 2050 compared to 1990 levels, within the context of the IPPC Directive. The Copenhagen Conference from 7 to 18 December 2009 is also in line with those objectives.

ACT

Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC. Regulation (EC) No 219/2009.


SUMMARY

This Directive aims to introduce significant reductions in greenhouse gas emissions with a view to reducing the influence of such emissions on the climate.

Greenhouse gas emission permits

Since 1 January 2005, all installations carrying out any of the activities listed in Annex I to this Directive (activities in the energy sector, iron and steel production and processing, the mineral industry and the wood pulp, paper and board industry) and emitting the specific greenhouse gases associated with that activity must be in possession of an appropriate permit issued by the competent authorities.

Applications for greenhouse gas emission permits must describe:
 

  • the installation, its activities and the technology used;
  • the materials used which could emit the greenhouse gases listed in Annex II;
  • the sources of gas emissions;
  • the measures planned to monitor and report emissions.

The authorities will issue a permit provided that they are satisfied that the operator of the installation is capable of monitoring and reporting the emissions. A permit may cover one or more installations on the same site operated by the same operator.

The competent authority will reexamine the greenhouses gas emissions permit at least every five years and make the necessary modifications.

Management of allowances

The Community-wide quantity of allowances issued each year shall decrease in a linear manner as from 2013. For 2013, the absolute Community-wide quantity of allowances shall be calculated on the basis of the national plans accepted by the Commission and introduced between 2008 and 2012.

Member States shall auction all allowances which are not allocated free of charge. The distribution of allowances by auction shall take place according to the following procedures:
 

  • 88 % shall be distributed amongst Member States on the basis of their emissions;
  • 10 % shall be distributed for the purpose of solidarity and growth;
  • 2 % shall be distributed amongst Member States for which the GHG emissions were, in 2005, at least 20 % below their emissions in the base year applicable to them under the Kyoto Protocol.

June 2010: report assessing the situation with regard to energy-intensive sectors or subsectors that have been determined to be to a significant risks of carbon leakage.

December 2010, the European Commission adopts Europe-wide harmonised measures for the allocation of allowances.