European Union Greenhouse Gas Emissions Trading Scheme

 

With the ratification of the Protocol, the Member States of the European Union (hereafter: EU) accepted the obligation to reduce greenhouse gas (hereafter: GHG) emission by 8%, compared to 1990. This aim is helped to be reached by European Union Emissions Trading Scheme (EU ETS).

According to the Directive 2003/87/EC of the European Parliament and the Council of Europe, “Creating the Trading Scheme for Allowed Greenhouse Gas Emissions in the European Community and Changing Directive 96/61/EC of the Council” (hereafter: Trading Directive), since January 1, 2005, the trading with allowed GHG emissions began for the EU Member States – that is, the first EU ETS trading period, which has been also named pre-Kyoto trading period, i.e. CP0. Plants whose areas of activity and capacity correspond to the requirements indicated in Annex I of the Directive (i.e. exceed the limits allowed) participate in the EU ETS.

In trading with GHG emissions, Estonia is in the role of the potential ‘seller’. Due to the thorough restructuring of the economy, a significant decrease occurred in emission levels in the beginning of the 1990s in Estonia, compared to the level of emissions in this year, selected as the base year according to the international agreement. Sustainability measures started to be used in energy use, as well as renewable energy resources, wood and timber processing waste was utilised and contemporary technologies applied to use, alternative production was promoted as well among energy production methods. All this has helped to reduce GHG emissions together with the significant decrease of the summary energy consumption in all sectors of economy.
 
In order to trade, each Member State had to develop a national distribution plan (hereafter: NDP) of allowed emissions for the first three-year trading period (2005-2007). According to the state need to reduce GHG emissions, operators are given a specific threshold quantity of GHGs, which the operators may emit to the air. If the operators emit less than the threshold quantity, they may sell the gap of the threshold quantity and the real emission quantity.

The second trading period of EU ETS (the duration of 5 years) comprises the time period of 2008-2012 and is at the same time the first period of an international GHG emission trading system, that is, the so-called post-Kyoto Protocol trading. In the second trading period, aircraft operators of the sector of aeronautics, who cross the threshold quantities in Annex I of the Directive on supplemented and joined trading, are involved in EU ETS.

Since 2013, the third EU ETS 8-year trading period begins, which is longer than the previous periods, and the principles of applying for allowed emission quantities (AEQ) have changed. During this trading period, auction market will be mostly applied, and the free allotment of AEQs to the operators belonging to EU ETS will be gradually reduced.

 

 

Last updated: 5 June 2014


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