Green matters
Emissions trading
The European Emissions Trading Scheme (EU ETS) was set up in 2005 as part of a long-term policy across Europe to reduce carbon emissions.
The first phase of the scheme (2005-2008) covers electricity generation and energy intensive industries such as power stations which make up approximately half of the UK’s carbon dioxide emissions.
The scheme works on a ‘cap and trade’ basis which distributes allowance to business, with these allowances setting a limit to the quantity of pollutant they can emit. The total amount of allowances allocated is set at the level required to meet overarching environmental objectives. Businesses which can reduce their emissions cheaply are able to cut their emissions to a level below their allocated allowances and sell their excess allowances to businesses that face higher costs of abatement or keep them for compliance in future years.
The second phase of the scheme will cover the period 2008-2012 and there are now proposals to include surface transport and aviation in the emissions trading scheme.
The UK Government produced a discussion paper on the inclusion of surface transport, to access please click here
The Government also consulted with key stakeholders on proposals to include aviation, to view the consultation, click here
In January 2008, the European Commission published its draft proposals for the review of the EU ETS. The review will find out how to develop the EU ETS in a positive way after 2012. The UK responded to these draft proposals and will now be entering into negotiations with other member states and the Commission. The formal consultation will be released soon. Once the proposals are agreed by the European Council and European Parliament, the changes will need to be transposed into UK law and this is expected to happen in 2010.