EU-ETS : European Emissions Trading Scheme
The European directive 2003/87/EC establishing a scheme for GHG emission allowance trading (EU-ETS) and its amending directive 2004/101/EC, the "linking directive" between the EU-ETS and the Kyoto Protocol, have established a CO2 emission market for big stationary emitters (combustion capacity greater than 20 MW) from :
- the power and heat generation industry ;
- combustion plants, oil refineries, coke ovens, iron and steel plants ;
- factories making cement, glass, lime, bricks, ceramics, pulp and paper.
The scheme started on the 1st January 2005 and includes three main phases :
- 2005-2007 : the test period ;
- 2008-2012 : the first Kyoto commitment period ;
- post-2012 : to be defined according to international negotiations at the UNFCCC level on the extension/modification of the Kyoto Protocol after 2012.
The scheme will be regularly reviewed and each period opens opportunities to extend the scheme to other GHGs or to other emitters.
The mechanism is based on a "cap and trade" system with, during the first phase, at least 95% of emission allowances allocated free of charge to emitters according to their historical emissions ("grandfathering") and to their negotiation capacity with public authorities in charge of setting emission caps. In fact, the EU-ETS does not apply any global specific emission ceiling : it is a national-oriented system where each member state decides for each phase, in a National Allocation Plan, how to share its Kyoto target between installations taking part in the EU-ETS and the rest of its GHG emitters.
The rest of the allowances are allocated to new entrants according to a benchmark.
Each year, emitters will have to comply with their own emission cap.
Allowances can be sold on the market and bought by anyone. They can be "banked" by emitters in order to cover emissions for a coming year of a same period but it will be impossible to use allowances of one phase to cover emissions during another phase.
Member states are in charge of the establishment of a national GHG emission registry in accordance with specific guidelines. Emission calculations and inventories are also harmonised within the EU, and in accordance with IPCC guidelines for the UNFCCC, by the EMEP/CORINAIR methodology.
Based on ABC Impacts WP1.1
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