The EU has taken a decision to improve and extend the EU Emissions Trading Scheme (ETS). The European Commission proposed a series of changes to the ETS, which were agreed by EU member states – though with some significant amendments – and passed by the European Parliament. New legislation has now been adopted and the changes will take effect in 2013 (Phase III of the ETS).
Overall, the aim is to create a better-harmonised EU carbon market by setting a single EU-wide cap on allowances that reduces year-on-year, and removing discrepancies between national methods of allocating allowances. The result should be greater clarity, credibility and predictability in the carbon market.
Emissions from those sectors covered by the ETS will be cut by 21% by 2020 compared with 2005 levels. A single EU-wide cap on ETS emissions will be set, and free allocation of emission allowances will be progressively replaced by auctioning of allowances. Under the new system over 40% of total EU emissions would be covered by the ETS.