EU legislation

11-06-08

Now in its fourth year, the scheme already sees large energy users set annual allowances for their carbon emissions, with those companies able to trade any surplus allowances.

The total number of these emission allowances on the market is to be reduced year-on-year, to allow for emissions covered by the ETS to be reduced overall by 21% from 2005 levels in 2020.

For the power sector, their ETS allowances will be auctioned each year by Member States from 2013. Other industrial sectors, including aviation, will move gradually towards full auctioning. Auctions will be opened so that any EU operator can buy allowances in any Member State.

The Commission is seeking to impose an EU-wide cap on greenhouse gas emissions forcing through a 20% reduction by 2020, stretching to 30% if a global agreement on carbon emissions can be agreed. These reduction requirements are based on 2005 emissions levels.

Proposals also seek to share out efforts to reduce EU greenhouse gas emissions among business sectors not covered by the EU emissions trading system - such as transport, buildings, services, smaller industrial installations, agriculture and waste.

UK business sectors not covered by the ETS now face requirements to reduce their emissions by 16% by 2020.

As well as including more business sectors in the scheme, the Commission also wants to expand the system to cover the emission of greenhouse gases other than just carbon dioxide, which is currently the only climate change-causing emission included.