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EU Emissions Trading Scheme

​​The 2009 Emissions Trading Directive established a cap and trade system for GHG emissions associated with large industry and electricity generation installations across the EU. The EU ETS includes some 11,000 installations (101 currently in operation in Ireland of which 75 are industrial installations), with an installed capacity of more than 30MW. It covers about 45% of EU emissions, but only just over 25% of total emissions in Ireland.

The EU Emissions Trading Scheme (ETS) is one of the key policy measures used by the EU to reduce industrial GHG emissions in a cost-effective manner. Emissions Trading is a ‘cap and trade’ scheme whereby an EU wide limit or cap is set for participating installations. The cap is reduced over time so that total emissions are reduced. Within that limit, “allowances” for emissions are auctioned or allocated for free. Individual installations must report their CO2 emissions each year and surrender sufficient allowances to cover their emissions. If their available allowances are exceeded, an installation must purchase allowances. If an installation has succeeded in reducing its emissions, it can sell its leftover allowances or keep these for a later period.

The ETS system is designed to bring about reductions in emissions at least cost, and to date has played an increasingly important role in assisting European industry implement the type of reductions envisaged in the EU Commission’s limit of at least an overall 20% reduction of GHG emissions in the EU by 2020. The scheme came into being in 2005, with Phase One introduced as a three-year pilot which ran until 2007. Phase Two operated between 2008 and 2012, and Phase Three from 2013 until 2020.

At a meeting of the Environment Council on 28 February, agreement was reached on a general approach on the revised ETS proposal, a position Ireland was able to support. This will now enable the Council to begin negotiations with the European Parliament on the proposal. It is currently anticipated that this process will reach a conclusion later this year.
The ETS is run on a day to day basis in Ireland by the EPA and further information on the operation of the scheme in Ireland is available on their website.