Emissions Trading – Putting a Price on carbon

14 Jul: Questions and Answers – Emissions Trading – Putting a Price on carbon

(Source: European Commission)

1. What is the EU Emissions Trading System?

The EU Emissions Trading System (ETS) works on the principle of ‘cap-and-trade’. It sets an absolute limit or ‘cap’ on the total amount of certain greenhouse gases that can be emitted each year by the entities covered by the system. This cap is reduced over time so that total emissions fall.

Since the EU ETS was introduced in 2005, emissions have been cut by 42.8% in the main sectors covered: power and heat generation and energy-intensive industrial installations. As a market-based system, the ETS ensures that emission reductions take place where …