Energy Union Summer 2015 Package (1 of 3): Revision of EU Emission Trading System






Excerpt for EU ETS:

"A European emissions Trading System fit for the future"

"The EU Emissions Trading System (ETS) is Europe's flagship tool for tackling climate change and to place the EU on track towards a low-carbon economy. Today's proposal sends a powerful signal to the international community in the run-up to the Paris climate summit. The proposal comes at a critical time when other major players such as the G7 and China have also shown their firm determination. The Commission revised the Emissions Trading System to ensure that it remains the most efficient and cost-effective way to cut emission in the decade to come. This is the first legislative step towards implementing the EU's commitment to reducing greenhouse gas emissions by at least 40% domestically by 2030. "




EU's flagship tool to tackle #ClimateChange & further low-carbon eco: #EUETS More:  #EnergyUnion



#EUETS revision to increase pace of #GHG emissions cuts after 2020 to fight #climatechange 

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#EnergyUnion Cutting #EU emissions by 2030. Our proposal: 43% reduction in #EUETS sector …

EU leaders agreed on 23 October 2014 the domestic 2030 greenhouse gas reduction target of at least 40% compared to 1990 together with the other main building blocks of the 2030 policy framework for climate and energy, as proposed by the European Commission in January 2014.


To achieve the overall 40% target, the sectors covered by the EU emissions trading system (EU ETS) would have to reduce their emissions by 43% compared to 2005. Emissions from sectors outside the EU ETS would need to be cut by 30% below the 2005 level.

The European Commission presented in July 2015 a legislative proposal to revise the EU emissions trading system for the period after 2020.


1. Increasing the pace of emissions cuts:

To this end, the overall number of emission allowances will decline at an annual rate of 2.2% from 2021 onwards, compared to 1.74% currently.


2. Better targeted carbon leakage rules:

The proposal further develops predictable, robust and fair rules to address the risk of carbon leakage which may occur if production is transferred to countries with less ambitious climate policies.


3. Funding low-carbon innovation and energy sector modernisation:

  • Innovation Fund 

  • Modernisation Fund 

Free allowances will also continue to be available to modernise the power sector in these lower-income Member States.





The EU Emissions Trading System (EU ETS)


A summary based on this resource: For a detailed overview, see our EU ETS factsheet



The EU Emission Trading System: World’s biggest carbon market


“The EU ETS covers more than 11,000 power stations and manufacturing plants in the 28 EU member states as well as Iceland, Liechtenstein and Norway. Aviation operators flying within and between most of these countries are also covered. In total, around 45% of total EU emissions are limited by the EU ETS.”


The trading units of the system are allowances.


One allowance: Allows the holder to emit 1 tonne of CO2 or a specified amount of NO2 or PFCs.


A limit or cap for what can be emitted is set: For 2013 it was set to 2,084,301,856 allowances. This means that 2.1bn of allowances were issued.


Allowances are allocated for free or via auctions.


A specific number of allowances is given for free but this number diminishes progressively.

(In special cases, allowances are given to factories that invest a lot to decarbonise).


A price is set for the allowances via auctions. Allowance allocation by auctions means that the businesses have to buy the allowances at auctions.


During phase 3 of the EU ETS (2013-2020), the cap decreases each year by 1.74%. In absolute terms this means the number of general allowances will be reduced annually by 38,264,246.


The amount of allowances issued will determine the price of the allowance. If there are a lot available, it won’t be hard to obtain them and the price will be low.


"2005-2007: 1st trading period used for ‘learning by doing.’ EU ETS successfully established as the world’s biggest carbon market. However, the number of allowances, based on estimated needs, turns out to be excessive; consequently the price of first-period allowances falls to zero in 2007."


If a factory has a lot of allowances it can save them for next year or sell them to another factory that does not have enough.


If a factory exceeds the volume of emission corresponding to its allowances it will pay a fine 100 EUR per tonne of CO2.



Linkage to International Carbon Market





"The Commission is a founding member of the International Carbon Action Partnership (ICAP), which brings together countries and regions that are actively pursuing the development of carbon markets through implementation of mandatory cap-and-trade systems. "


"Pathway towards linking EU and Australian systems"

"In a major step towards the first full inter-continental linking of emission trading systems, the Commission and Australia announced agreement in August 2012 on a pathway for linking the EU ETS and the Australian emissions trading scheme."


"Introducing the new market mechanism in developing countries"

"This goal has been given momentum by the decision of the 2011 UN climate conference in Durban to set up a new market mechanism under the UNFCCC. The EU is pressing for the modalities and procedures of the new mechanism to be established as soon as possible, and is exploring the idea of setting up pilot programmes in sectoral crediting."



The International Carbon Action Partnership (ICAP)

(Emission Trading System Platform)