Emissions trading
A trading system for emission allowances was introduced in the EU region on 1 January 2005. The system will continue until 2012 and establishes a cap on total greenhouse gas emissions within the EU.
Europe is committed to reduce its total emissions of carbon dioxide by 8 per cent between 1990 and 2008–12 according to the Kyoto Protocol. The emissions trading system is the main instrument to fulfill this goal.
The emission allowances are divided between the EU countries, and at a national level, between the participating companies represented mainly by energy and heavy industrial plants. In total, more than 10,000 European installations participate in the trading scheme.
The cap restricts emissions, and with an increasing shortage of emission allowances their market value will increase. In this way, an economic incentive is provided to increase investments in production with lower levels of carbon dioxide emissions. The companies have to choose the most cost-efficient alternative, either buying emission allowances or taking technical measures in order to reduce emissions.
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