Country:European Union
Policy status:In Force
Date Effective:2003
Date Amended:


Policy Type:Economic Instruments>Market-based instruments>GHG emissions trading
Agency:European Commission, Directorate-General Climate Action
Legal References:Directive 2003/87/EC and Directive 2009/29/EC
Climate Change Description:

The Directive establishing an EU emissions trading scheme in 2005 was agreed on 22 July 2003. Member States must implement the Directive as national legislation before October 2004.

The system covers the power sector (all fossil fuel generators over 20 MW), oil refining, cement production, iron and steel manufacture, glass and ceramics, and paper and pulp production. The Commission will initiate a review in 2006 which may propose to include additional sectors. The system covers only CO2 emissions.

From 2005-7 Member States may "opt-in" smaller installations within the above sectors. From 2008-12 they may "opt-in" additional sectors, including non-CO2 greenhouse gases. From 2005-7 Member States may apply to "opt-out" specified installations (subject to Commission approval), but from 2008 onwards all eligible installations must be covered.

Member States must develop by March 2004 a national allocation plan. This will set targets for the relevant sectors and allocate allowances (each worth 1 tonne CO2) to installations for the relevant periods. All installations will effectively be set an absolute emission cap. In a Communication on 7 January 2004, the Commission presented eleven criteria that Member States should use to draw up their plans. Some of the criteria presented in the document are of a mandatory nature whereas others are optional. Some apply to the total level of allowances allocated; others only have an effect for sectors or individual installations. Installations must meet their targets by reducing emissions or by buying allowances. Allowances will be allocated free of charge. Member States have an option to auction a small proportion (up to 5% for the period 2005-2007 and up to 10% for the period 2008-2012). Moreover, concerning a mechanism for monitoring Community greenhouse gas emissions and for implementing the Kyoto Protocol, the European Union aims:- to monitor all anthropogenic greenhouse gas emissions not controlled by the Montreal Protocol in the EC Member States; - to transpose related requirements under the Kyoto Protocol into EC Law and; - to evaluate progress towards meeting greenhouse gas reduction commitments under the UNFCCC and the Kyoto Protocol (KP).

This record is superseded by:EU Emissions Trading System Phase 3 (2013-2020)
This record supersedes:European Union

Last modified: Fri, 05 May 2017 16:59:30 CEST