What is the European Union Emissions Trading Scheme (EU-ETS)?
The European Union Emissions Trading Scheme (EU-ETS) is a cap-and-trade scheme that has been running in the EU since 2005. With one allowance representing one tonne of carbon dioxide (CO 2 ), it operates through the allocation and trading of emission allowances. The total amount of emissions from industry sectors covered by the EU-ETS is capped by EU Governments, and allowances are subsequently distributed to operators. The aim of the EU ETS scheme is to reduce emissions in a cost effective manner, allowing companies to trade emission allowances and thereby determine how and where they reduce emissions. At the end of each year, operators are required to account for their emissions from the past year and to surrender the matching number of allowances to the competent authority. Depending on their actual emissions and their free allocation of allowances, operators have the flexibility to buy additional or sell surplus allowances.
