EU Emissions Trading: Strong Compliance In 2006, Emissions Decoupled From Economic Growth

Carbon dioxide (CO2) emissions from installations participating in the EU Emissions Trading Scheme (EU ETS) increased by 0.3% in 2006 when adjusted for the entry of new installations into the scheme. This is well below the 3% growth in EU Gross Domestic Product recorded last year. Based on the information received by the Community Independent Transaction Log (CITL) from Member State registries, all but 1% of installations surrendered emission allowances equal to their verified 2006 emissions by the 1 May deadline. The Emissions Trading Scheme ensures that greenhouse gas emissions from the energy and industry sectors covered are cut at least cost to the economy, thus helping the EU and its Member States to meet their emission commitments under the Kyoto Protocol.

European Environment Commissioner Stavros Dimas commented: "It is very encouraging to see that the mechanics of the EU ETS are working well and that the vast majority of installations have complied with their obligation to surrender allowances. While emissions will not necessarily fall in each year of a trading period, it is important to note that the rise last year was very limited and far below the rate of economic growth. Furthermore, I am convinced that the strict caps we are putting on allowances for the second phase of the ETS starting next year will greatly contribute to cutting our emissions and help us reach our Kyoto targets. "

'Learning by doing'

Last year marked the middle year of the first EU ETS trading period, which started with the scheme's launch on 1 January 2005 and ends on 31 December this year. The initial trading period has been conceived as a "learning-by-doing" phase.

The second trading period will begin on 1 January 2008 and run for five years, coinciding with the period during which the Kyoto Protocol targets must be met.

2006 data

The EU ETS requires installations to submit their verified emissions data to Member State registries. This data is then put into the CITL.

The total amount of verified emissions from EU ETS installations in the EU-25 last year was 2.026 billion tonnes of CO₂, 0.8% higher than the 2.010 billion tonnes recorded in 2005. Adjusted for the entry of more than 300 additional installations into the scheme since 2005, the increase in verified emissions from 2005 to 2006 was 0.3%.

Of the 10,605 installations participating in the scheme last year, 380 failed to meet a 1 May 2007 deadline to surrender a number of allowances equal to their verified emissions. These installations are typically small and their cumulative allocation represents only 1% of all allocations in the EU. About 160 of these installations complied during the course of May, reducing non-compliant installations' share of the total allocation to 0.2% currently.

The Commission plans to provide public reports on the compliance situation at installation level in each Member State in June.

Assessing overall impact of the scheme
A lack of independently verified emissions data for the years before the EU ETS was launched makes it difficult to measure the scheme's full impact on emissions. However, some early academic research indicates that emissions may have fallen by several per cent in 2005 compared with their level before the start of the EU ETS.