European Union Emissions Trading System (EU ETS)
What is the EU ETS?
The European Union Emissions Trading System forms the main part of the EU’s policy for tackling climate change. It is the first and largest multi-sector emissions trading system in the world, covering 31 countries across Europe. It is a mandatory regulatory requirement for certain sectors and organisations above a certain size.
It works using a ‘cap and trade’ system, which sets a limit or ‘cap’ on the total amount of greenhouse emissions produced by all participants in the system. The cap is then converted to tradable emissions allowances, that are either allocated to participants for free, or sold in auctions. Participants who are likely to emit more than quota can either reduce emissions or buy extra allowances through resale on the secondary market, from companies who are emitting less than their allowance.
Why was it introduced?
The system works as a useful tool for cost-effective reduction of CO2 and other greenhouse gas (GHG) emissions in the power, industrial and aviation sectors. It limits emissions from over 11,000 power stations and industrial plants across the EU, with around 1,000 of these based in the UK.
It does not matter where the emission reductions are made within the system, so long as overall emissions are kept within the capped limit. The trading system allows emission reductions to take place wherever the financial impact is lowest, reducing the cost of tackling climate change.
Who needs to comply?
Manufacturing industries that produce iron and steel, lime and cement, paper, glass, ceramics and chemicals, along with power stations, oil refineries and aviation operators flying to or from European airports are all covered by the policy.
Other organisations such as hospitals and universities may also be covered depending on their combustion capacity. However, the UK has introduced an opt-out scheme for small emitters and hospitals, which alleviates some of the cost and administrative burden for these less significant polluters.
How can we help?
We offer full support and guidance for EU ETS compliance and can advise on the best course of action for your organisation. Whether you are currently covered by the legislation, need to apply for the latest phase IV due to commence on the 1 January 2021, or would like advice on opting out of the scheme as you are a small emitter.
Get in contact with our team of compliance experts today to find out more about how we can help your business navigate the complex world of energy compliance legislation.