Reform of EU emissions trading system (EU ETS)

Citizens occasionally write to the European Parliament asking about the functioning and the recent reform of the EU emissions trading system (EU ETS).

The EU emissions trading system (EU ETS) is a cornerstone of the European Union’s policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. The first – and still by far the biggest – international system for trading greenhouse gas emission allowances, the EU ETS covers more than 11000 power stations and industrial plants in 31 countries, as well as airlines.

Backloading

Launched in 2005, the EU ETS is now in its third phase, running from 2013 to 2020. The growing surplus of emission allowances has seen the carbon price fall well below the levels estimated when the ETS was created. The European Commission therefore proposed measures to enable it to “backload” – or delay – the timing of a portion of the credits to be auctioned.

These plans to freeze the auctioning of a portion of the current glut of CO₂ permits (ETS backloading), so as to boost their price and encourage firms to invest in low-carbon innovation, got the EP’s seal of approval in December 2013. The measures, amended by the EP in July 2013 to set stricter conditions for the freeze, are intended to restore the incentive effect of the emissions trading system, which is designed to curb CO₂ emissions.

The measures to correct the carbon market are implemented by the European Commission.

 Aviation emissions

Efforts to make aviation greener continue to prove controversial. When the EU launched EU ETS to encourage airlines to become more sustainable, it met with a lot of resistance from countries outside the EU. The legislation on aviation emission allowances covers only intra-EU flights until the start of 2017, but will apply to all flights to or from the EU thereafter.

More information on aviation emissions is available in the European Parliament’s press release of 3 April 2014 and on the European Commission’s webpage Reducing emissions from aviation.

General information on the EU’s climate change policy and the EU ETS is available in the European Parliament’s fact sheet on climate change and the environment and on the European Commission’s webpage “The EU Emissions Trading System (EU ETS)“.

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