EU Emissions Trading Scheme comes into force

Tue 01 February 2005 View all news

The EU Emissions Trading Scheme (EU ETS) - a key European policy for tackling emissions of carbon dioxide and other greenhouse gases and for meeting Kyoto Protocol targets  - commenced on 1st January 2005.

The scheme covers larger 'combustion installations' - installations for the production of energy for use by or in another appliance - including oil refineries.

The first phase runs from 2005-2007 and the second phase will run from 2008-2012 to coincide with the first Kyoto Commitment Period. Further 5-year periods are expected subsequently.

The scheme will work on a "Cap and Trade" basis. EU Member State governments are required to set an emission cap for all installations covered by the scheme. Each installation is then  allocated allowances for the period in question. The number of allowances allocated to each installation for any given period, (the number of tradable allowances each installation will receive), is set down in a document called the National Allocation Plan.

While the first trades under the scheme have already taken place, there is a threat to its future as a result of legal action by Britain, Germany and other countries against the European Commission over the level of initial emissions allowances. It is reported that the threat of legal action could delay trading by several months.

Related Links

Defra - EU Emissions Trading Scheme information
Guardian report on legal threat

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