EU: A More “Robust” ETS Scheme Needed

European environment ministers have agreed to revise the EU’s CO2 emissions-trading (ETS) scheme with the aim of clamping down on weak caps proposed by member states and ensuring that all significant emitters pay the right price for their pollution.

Late last month EU ministers called for a full review of the ETS scheme, which has been operational since 2005.

It allows energy-producing companies to buy and sell carbon credits (allowances) on the market in order to achieve target cuts in the amount of CO2 emissions they release into the atmosphere.

Responding to criticism that too many allowances have been handed out in recent years, ministers agreed that the cap-setting mechanism for member states should be bolstered, giving governments fewer opportunities to over-allocate. They also said that a larger number of credits should be auctioned in the future, rather than given to companies for free – a move so far resisted by companies.

The Environment Council also agreed that the cap-and-trade system should cover greenhouse gases apart from CO2 and should apply to “all installations with significant CO2 emissions” – not only power generation and energy-intensive industries. A proposal to include aviation in the scheme has already been tabled, but is subject to vigorous lobbying on behalf of the airline industry.