The concept of GHG emissions trading stems from the Kyoto Protocol. The more than 180 countries that signed the Protocol have committed to reduce their collective greenhouse gas emissions with at least 5 % compared to the 1990 by 2008-2012. To meet this target, cuts have to be made by the national industries and individual large companies. A trading scheme provides countries, companies, and organisations with the flexibility to determine the most economic means to reduce emissions.
International trading schemes
In Europe, the European Directive on Emissions Trading (EU ETS) will enter into force on January 1, 2005. Companies covered by the scheme will have to limit their CO2-emissions according to allocated allowances. Companies that fail to meet their emissions allowance will be penalised while companies who perform below the target can sell surplus allowances or retain them for later use. Under the European scheme, CO2- emissions become a liability or an asset depending on the company’s ability to manage its emissions.
National trading schemes
Countries like Denmark and the United Kingdom have already instituted national trading systems. A number of other countries and the European Union are planning implementation of emissions trading schemes in the pre-Kyoto Period, i.e. before 2008.
In a national emissions trading scheme, companies can cut their own emissions by buying compensation credits from companies that are performing at a level where their emissions are well below the actual emission allowance.
The various national schemes have different rules and requirements for how to perform the transactions. Please contact us for further information.
Where do I go from here?
- If you operate in Europe within sectors such as energy, metals, minerals, or pulp and paper, your company may have to comply with the requirements of the new European emissions trading scheme. If so, you should continue to read about the European Directive on Emissions Trading (EU ETS).
- Certain countries have already implemented national trading schemes. If you operate in the UK, you should begin reading about the UK Emissions Trading Scheme.
