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8 January 2007

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EU Emissions Trading Scheme

What is the EU Emissions Trading Scheme (EU ETS)?

The scheme is one of the policies introduced across the European Union (EU) to help it meet its greenhouse gas emissions reduction target under the Kyoto Protocol. The EU has to make an eight per cent reduction on 1990 levels by the first Kyoto Protocol commitment period (2008 - 2012).

The UK Kyoto target is 12.5 per cent. The EU ETS will also contribute to delivering the UK's domestic goal of a 20 per cent reduction in CO₂emissions by 2010.

How the EU ETS works

The scheme is cost-effective and operates by the allocation and trading of greenhouse gas emissions allowances throughout the EU – one allowance represents one tonne of carbon dioxide equivalent.

An overall limit, or ‘cap’, is set by Member State’s Governments on the total amount of emissions allowed from all the installations covered by the scheme. The allowances are then distributed to the installations in the scheme.

At the end of each year, operators are required to ensure they have enough allowances to cover their installation’s emissions. They have the flexibility to buy additional allowances (on top of their free allocation), or to sell any surplus allowances generated from reducing their emissions. These options create a flexible compliance regime for operators and also ensures emissions are effectively capped across the EU. 

The scheme currently has two operating phases:

•  Phase 1 from 1 January 2005 to 31 December 2007
•  Phase 2 from 1 January 2008 to 31 December 2012

Installations covered by the EU ETS are those which carry out activities listed in Annex I of the EU ETS Directive. These include energy activities, production and processing of ferrous metals, mineral industries and pulp and paper industries.

What the EU ETS means for your business

 The EU ETS Directive requires all installations carrying out activities listed in Annex I to hold a greenhouse gas emissions permit. The conditions of the permit will require installations to monitor and report emissions in accordance with the Commission’s guidelines for monitoring and reporting. Each year emissions data must be verified, and the equivalent number of allowances surrendered. All transactions and surrendering of allowances take place on a national registry.

What to do next

The following sections will tell you among other things how to apply for a permit and open an account and answer frequently asked questions:

• EU Emissions Trading Scheme Phase 2 Data Request
  Submit your data now for inclusion in phase 2 of the EU Emissions Trading Scheme.
• Apply for or change a permit
  
• Forms and guidance
  
• Apply to the New Entrant Reserve
  
• Open Registry account
  
• Allowance allocation
  
• Fees and charges for the EU ETS
  
• Frequently asked questions on EU ETS
  

To find out more about the EU Emissions Trading Scheme see:

• EU ETS -dti
  

To read more about the National Allocation Plan see:

• National Allocation Plan -Defra
  

LETS Update: shaping the future of the EU ETS

This Environment Agency led project will examine the feasibility of expanding the scope of the scheme to cover additional business sectors and gasses. It will also look at ways of improving how the scheme works. For more details see:

• LETS Update: shaping the future of the EU ETS
  

General enquiries call 08708 506 506 or email: ethelp@environment-agency.gov.uk

For submission of completed applications email: etapps@environment-agency.gov.uk

For registry matters email: etregistryhelp@environment-agency.gov.uk  

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©The Environment Agency 2007
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Author: Vicky Quill | enquiries@environment-agency.gov.uk