EU Emissions Trading

Untitled Document

The European Union is committed to global efforts to reduce the greenhouse gas emissions from human activities that threaten to cause serious disruption to the world’s climate. Building on the innovative mechanisms set up under the Kyoto Protocol to the 1992 United Nations Framework Convention on Climate Change (UNFCCC) — joint implementation, the clean development mechanism and international emissions trading — the EU has developed the largest company-level scheme for trading in emissions of carbon dioxide (CO2), making it the world leader in this emerging market. The emissions trading scheme started in the 25 EU Member States on 1 January 2005.

A key aspect of the EU scheme is that it allows companies to use credits from Kyoto’s project-based mechanisms, joint implementation (JI) and the clean development mechanism (CDM), to help them comply with their obligations under the scheme. This means the system not only provides a cost-effective means for EU-based industries to cut their emissions but also creates additional incentives for businesses to invest Trading emissions to cut costs and reduce emissions worldwide in emission-reduction projects elsewhere, for example in Russia and developing countries. In turn this spurs the transfer of advanced, environmentally sound technologies to other industrialised countries and developing nations, giving tangible support to their efforts to achieve sustainable development.

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