The Revised Emissions Trading Scheme Directive (2009/29/EC) and nine other related acts were incorporated into the EEA Agreement yesterday, making the EEA EFTA States part of the improved and extended greenhouse gas emissions trading scheme (EU ETS), which began operating in the European Union in 2005.
The EEA EFTA States of Iceland, Liechtenstein and Norway have participated in the EU ETS since 2008.
Under this scheme, the largest emitters in the area (both industrial, stationary installations and aircraft operators) are subject to an absolute ‘cap’ of their emissions – decreasing over time – and must surrender emission allowances corresponding to their volume of actual emissions. Residual allowances may then be traded on the EU carbon market, which will generate financial incentives to reduce emissions where this is most cost-effective. While some allowances are given to emitters for free, an increasing proportion are auctioned on the market.
The legislative package adopted yesterday sets up modalities for the third ‘trading phase’ to be launched on 1 January 2013. Key new features include a longer timeframe (eight years), an annually decreasing cap (which would bring EU emissions 21% below their 1990 levels by 2020), and the increased use of auctioning (which will now cover more than half of all allowances). The Revised ETS covers additional sectors such as the petrochemical and aluminium industries as well as Carbon Capture & Storage (‘CCS’) activities in the EEA.The legislative package will entail substantial harmonisation, notably through the use of EU- and EEA-wide caps instead of national caps and common rules on free allocation.