Emissions trading schemes

In order to meet its obligations under the Kyoto Protocol, the European Union has launched an Emissions Trading Scheme (EU-ETS) which in Phase I covers the carbon dioxide (CO₂) emitted from around 13,000 sites across the EU, embracing close to 46% of EU wide CO₂ emissions.

Phase I of the EU-ETS is a pilot phase which began on January 1, 2005. It requires the EU to reduce CO₂ emissions by 3% from its baseline. While the pilot phase saw European Governments issue too many allowances, what will make this effective over the longer haul is that over time the EU is reducing the number of allowances in circulation, making the targets for emitters more challenging. The target for Phase II of the EU-ETS, which will cover 2008-2012, will see emissions reduced by a further 6%.

The United States has not ratified the Kyoto Protocol and there are no federal regulations to limit GHG emissions. However, seven States in the North-Eastern United States are planning to launch a GHG emissions trading system in 2009 and States on the West Coast are also examining GHG emissions trading proposals. The Chicago Climate Exchange (CCX) already operates voluntary, legally binding pilot programme for reducing and trading greenhouse gas emissions in North America.