European Union Emissions Trading System
[7] A 2023 study on the effects of the EU ETS identified a reduction in carbon emissions in the order of -10% between 2005 and 2012 with no impacts on profits or employment for regulated firms.
Credits are gained by investing in clean technologies and low-carbon solutions, and by certain types of emission-saving projects around the world to cover a proportion of their emissions.
[25][26][27] The price of EU ETS carbon credits has been lower than intended, with a large surplus of allowances, in part because of the impact of the recent economic crisis on demand.
[34] According to the OECD Economic Survey of Norway 2010, the nation "has announced a target for 2008–12 10% below its commitment under the Kyoto Protocol and a 30% cut compared with 1990 by 2020.
The Kyoto flexible mechanisms are: IET is relevant as the reductions achieved through CDM projects are a compliance tool for EU ETS operators.
The implementation of Clean Development Projects is largely specified by the Marrakech Accords, a follow-on set of agreements by the Conference of the Parties to the Kyoto Protocol.
[38]: 11 Like the Kyoto trading scheme, EU ETS allows a regulated operator to use carbon credits in the form of Emission Reduction Units (ERU) to comply with its obligations.
Hence, because the EU decided to accept Kyoto-CERs as equivalent to EU-EUAs, it is possible to trade EUAs and UNFCCC-validated CERs on a one-to-one basis within the same system.
Of course, the Member State's plan can, and should, also take account of emission levels in other sectors not covered by the EU ETS, and address these within its domestic policies.
[46][47] To address these problems,[citation needed] the European Commission proposed various changes in a January 2008 package, including the abolishment of NAPs in 2013 and auctioning a far greater share (ca.
[59][60][61] In the first phase (2005–2007), the EU ETS included some 12,000 installations, representing approximately 40% of EU CO2 emissions, covering energy activities (combustion installations with a rated thermal input exceeding 20 MW, mineral oil refineries, coke ovens), production and processing of ferrous metals, mineral industry (cement clinker, glass and ceramic bricks) and pulp, paper and board activities.
[64] In late April 2006, several EU countries (the Netherlands, the Czech Republic, Belgium, France, and Spain) announced that their verified (or actual) emissions were less than the number of allowances allocated to installations.
The European Commission further stated that the single registry to be activated in June will not contain all the required functionalities for phase III of the EU ETS.
[77] The airline industry and other countries including China, India, Russia, and the United States reacted adversely to the inclusion of the aviation sector.
[79][80] China threatened to withhold $60 billion in outstanding orders from Airbus, which in turn led to France pressuring the EU to freeze the scheme.
[25] Ultimately, the Commission intended that the third trading period should cover all greenhouse gases and all sectors, including aviation, maritime transport, and forestry.
[86] In late 2006, the European Commission started infringement proceedings against Austria, Czech Republic, Denmark, Hungary, Italy and Spain, for failure to submit their proposed National Allocation Plans on time.
[91][93][94] The annual Member State CO2 allowances in million tonnes are shown in the table: The carbon price[96] within Phase II increased to over €20/tCO2 in the first half of 2008 (CCC, 2008, p. 149).
[98] In March 2012, according to the Periodical Economist, the EUA permit price under the EU ETS had "tanked" and was too low to provide incentives for firms to reduce emissions.
[103] For Phase III (2013–2020), the European Commission implemented many changes, including (CCC, 2008, p. 149):[85] Also, millions of allowances set aside in the New Entrants Reserve (NER) to fund the deployment of innovative renewable energy technologies and carbon capture and storage through the NER 300 programme, one of the world's largest funding programmes for innovative low-carbon energy demonstration projects.
[104] The programme is conceived as a catalyst for the demonstration of environmentally safe carbon capture and storage (CCS) and innovative renewable energy (RES) technologies on a commercial scale within the European Union.
On 22 January 2014, the European Commission proposed two structural reform amendments to the ETS directive (2003/87/EC) of the 2008 Climate Package to be agreed on in the Council Conclusions[112] on 20–21 March 2014 by the Heads of EU Member States at the meeting of the European Council:[113] Connie Hedegaard, the EU Commissioner for Climate Change, hoped "to link up the ETS with compatible systems around the world to form the backbone of a global carbon market" with Australia cited as an example.
[28] However, as the COP 19 Climate Conference again ended with no binding new international agreement in 2013, and after the election of the Liberal-National government, Australia dismantled its ETS system.
It was suggested that if permits were auctioned, and the revenues used effectively, e.g., to reduce distortionary taxes and fund low-carbon technologies, costs could be eliminated, or even create a positive economic impact.
The inclusion is currently opposed by NGOs as well as the EU commission itself, arguing that sinks are surrounded by too many scientific uncertainties over their permanence and that they have an inferior long-term contribution to climate change compared to reducing emissions from industrial sources.
[129][130] The European Commission said it would "proceed to determine together with national authorities what minimum security measures need to be put in place before the suspension of a registry can be lifted".
The ETS experienced a previous phishing scam in 2010 which caused 13 European markets to shut down, and criminals cleared 5 million euros in another cross-border fraud in 2008 and 2009.
[138][139] The EU ETS has been criticized[140] for several points including: over-allocation, windfall profits, price volatility, and in general failure to meet its goals.
[144] Researchers Preston Teeter and Jorgen Sandberg have argued that it is largely the uncertainty behind the EU's scheme that has resulted in such a tepid and informal response by regulated organizations.
[155][attribution needed] The 2009 EU ETS Amending Directive states that credits can be used for up to 50% of the EU-wide reductions below the 2005 levels of existing sectors over the period 2008–2020.
