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European Union Emissions Trading System

The European Union Emission Trading System (EU ETS) was introduced by the European Union (EU). The system will help meet the EU’s targets to reduce carbon dioxide emissions under the Kyoto Protocol.

It aims to encourage industries to invest in technology to reduce carbon dioxide emissions. It does this by putting a price on the emissions that large energy-intensive industries produce.

The scheme operates through the trade of allowances - one allowance is a tonne of carbon dioxide equivalent.

Any installation with combustion activity of 20 Megawatts (MW) or more is covered by the scheme.

The scheme is divided into phases:

  • phase I ran for 3 years - 1 January 2005 to 31 December 2007
  • phase II ran for 5 years - 1 January 2008 to 31 December 2012
  • phase III runs for 5 years - 1 January 2013 to 31 December 2016.

The EU ETS is administered by the Environment Agency for the whole UK, but is regulated in Wales by Natural Resources Wales (external link).

More information of the European Union Emission Trading System (external link) can be found on the Gov.uk website.