Filter By:


The EU emissions trading system (EU ETS) is a cornerstone of the EU's policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. It is the world's first major carbon market and remains the biggest one. Since 2012, the EU emissions trading system (ETS) applies to flights to and from airports in the European Economic Area (EEA). Meanwhile, the International Civil Aviation Organization (ICAO) has been developing CORSIA to offset post-2020 emissions growth in international aviation. In view of these international efforts, the EU exempted flights to and from airports outside the EEA from ETS obligations until 2016. The European Commission has proposed a regulation to prolong the exemption and prepare for the implementation of CORSIA.

The EU ETS works on the 'cap and trade' principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances which they can trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world. The limit on the total number of allowances available ensures that they have a value. After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances. Trading brings flexibility that ensures emissions are cut where it costs least to do so. A robust carbon price also promotes investment in clean, low-carbon technologies.

Source: ERA/European Commission