EU's Emissions Trading Scheme
The EU Emissions Trading Scheme (EU ETS) is the world’s largest carbon market, covering more than 11 000 industrial and power plants in the EU-28, as well as in Iceland, Liechtenstein and Norway. The EU ETS covers about 40% of the EU’s greenhouse gas emissions.
ETS 3rd Trading Period (2013-2020)
The EU ETS sets a limit on the amount of greenhouse gas emissions that can be emitted. Companies covered by the EU ETS receive or buy pollution permits – called EU allowances. One EU allowance allows for one tonne of CO2 to be emitted. The cap becomes slightly more stringent every year so that total emissions decline over time to minus 21% in 2020 and to minus 43% in 2030 from 2005 levels.
The ETS aims to help the EU achieve its emissions goals more cost-effectively and to catalyze investments in energy efficiency and renewable technologies. Despite being hailed as the flagship of European climate policy, the EU ETS has failed to deliver on these objectives.
A weak reduction target and the massive use of international offsets have led to the build up of and enormous surplus of emission allowances. Therefore, the price for allowances has dropped so much that it no longer drives change.
The reforms that have been passed (see the Market Stability Reserve) are not enough to fix the ETS.
ETS 4rd Trading Period (2021-2030)
EU decision makers are currently discussing how to reform the EU ETS for the post 2020 period. In July 2015, the European Commission released its proposal on the reform.
This proposal is discussed by the European Parliament and the Member States. UK MEP Ian Duncan (ECR), leads the European Parliament’s discussion.
Timetable in the European Parliament
- 13 October 2016 vote in the ITRE Committee
- 8 December 2016 vote in the ENVI Committee
- February 2017: European Parliament ETS plenary vote
- Second half of 2017 or 2018: finalizing ETS file likely together with non-ETS files: Effort Sharing Regulation and LULUCF legislation
Timetable and Presidencies European Council
In the Environment Council the Member States debate the ETS proposal under the leadership of its consecutive presidencies: 2016: Netherlands, Slovakia, 2017: Malta, Estonia (no UK presidency!), 2018: Bulgaria, Austria. Discussions are ongoing and will likely take until the middle or the end of 2017.
CAN Europe calls for more ambition and no loopholes
Absent reforms that go well beyond what the European Commission is proposing, companies can delay or cancel investments in cleaner and more efficient production. The sectors that cause almost half of the EU´s greenhouse gas emissions could continue polluting at business-as-usual levels for the next 10 years or longer. This risks a lock-in of carbon intensive infrastructure for years to come, making Europe’s climate goal more time-consuming and costly to achieve.
Last but not least, even if the reforms were to be bold and swift we will need other strong policies, such as for renewable energy and energy efficiency, and binding bioenergy sustainability criteria.
See also infographic: EU citizens pick up climate polluters bill
Calculate the size of the ESR and ETS emissions budgets under different scenarios with WWF's 2030 Carbon Calculator: www.2030carboncalculator.eu
CAN Europe ETS reform position for post-2020 contains detailed recommendations. Read More
Some market fundamentalists make that a simple price on carbon (ie an ETS) can fix everything. This is simply wrong, has been proven wrong by many studies and it will remain wrong no matter how often this myth is repeated. Read More
The success of the ETS revision hinges on its ability to make the polluter pay, rather than paying the polluter. Handing out free pollution permits contradicts the EU Treaty principle that polluters should pay. Read More
The Market Stability Reserve (MSR) temporarily removes soem of the ETS surplus from the market. Read More
Here you find a range of useful external ETS resources. Read More