Emissions Trading Directive
The multi-sector EU-wide Greenhouse Gas Emission Trading System (EU ETS - 2003/87/EC) commenced operation on 1 January 2003. Emission trading is intended to reduce emissions wherever this can be achieved most cost-effectively. The emissions trading scheme covers the carbon dioxide emissions of large industrial installations and combustion installations with a rated thermal input exceeding 20 MW. In Finland, the system also includes installations that produce district heat at less than 20 MV. The emissions trading system covers more than 40 per cent of greenhouse gas emissions within the EU, and approximately half of the greenhouse gas emissions within Finland.
The aim of the Emissions Trading Directive is to include the emissions of energy and industrial sectors in the emissions trading scheme within the total emissions specified in the national allocation plans and, as of 2013, within the emissions ceiling set for the EU’s emissions trading sector. The 2005-2012 allocation of allowances is based on the national allocation plans approved by the Commission. The national allocation allowances were set for 2005-2007 and for 2008-2012. Following the Commission’s consideration, the Member States have allocated free allowances to the operator of each installation. One emissions allowance is equivalent to one tonne of carbon dioxide.
Installations within the emissions trading scheme must have a permit to emit greenhouse gas emissions into the environment, granted by the competent authority. The permit includes monitoring and reporting obligations, with an obligation to surrender a number of allowances equal to the emissions from that installation during the preceding calendar year each year to the competent authority.
The EU Heads of State and the European Parliament reached an agreement in December 2008 that enabled an EU-wide Climate and Energy package to be adopted. The package contains a Directive to amend the Emissions Trading Directive (2009/29/EU) to cover the post-2012 period. A target of 20 per cent reduction by 2020, compared to the 1990 levels, will be implemented, and it will be divided between the EU ETS sources, i.e. participants of the Emission Trading Sector, and non-EU ETS sources, i.e. the Non-EU Emission Trading Sector. The EU-wide ETS target is to achieve a 21 per cent reduction by 2020, compared to the 2005 levels.
The Emissions Trading period will be extended by 8 years, thus covering the period 2013-2020. The scope for the Directive will be extended. Besides carbon dioxide emissions, the scope will cover perfluoride carbon emissions resulting from the manufacture of aluminium, and nitrous oxide emissions generated by the chemicals industry. The national allocation plans will be discontinued. The allocation of emission allowances will move towards harmonised division methods between various sectors. The allocation of emission allowances by auction is the primary method, and it will be used in electricity production. Energy-intensive industries receive their emission allowances in the main for free, according to strict harmonised allocation principles.