Emissions Trading: EU ETS Emissions Fall 3 % In 2008

Emissions of greenhouse gases from EU businesses participating in the EU Emissions Trading System (EU ETS) fell 3,06 % in 2008 compared with a year earlier, according to the information provided by Member State registries. With the 6.5% reduction in emission allowances that the Commission has secured for the second trading period, the EU ETS really started to make a difference to emissions in 2008. Last year marked the beginning of the second trading period of the EU ETS, which runs from 2008 to 2012.

Environment Commissioner Stavros Dimas said: "The 3 per cent reduction was partly due to businesses taking measures to cut their emissions in response to the strong carbon price that prevailed until the economic downturn started. It confirms that the EU has a well functioning trading system, with a robust cap, a clear price signal and a liquid market, which is helping us to cut emissions cost-effectively. This should encourage other countries in their efforts to set up comparable domestic cap-and-trade systems, which we would like to see linked up with the EU ETS to create a stronger international carbon market.”

2008 emissions data

Verified emissions of greenhouse gases from all installations in the EU ETS in 2008 totalled 2.118 billion tonnes of CO₂-equivalent. 2008 emissions (excluding those of Bulgaria, Liechtenstein and Norway where 2007 data is incomplete or unavailable) were 3,06% lower than the 2007 level. Emissions were reduced despite GDP growth in the EU-27 of 0.8% last year.

While the economic slowdown was felt strongly in the sectors covered by the EU ETS, the drop in emissions was also due to emission reduction measures undertaken by installations in reaction to the robust carbon price which prevailed for most of 2008 before the onset of the recession.

While the EU ETS had previously covered only emissions of carbon dioxide (CO₂), from 2008 onwards it also includes emissions of nitrous oxide from the production of nitric acid in the Netherlands and in Norway.

Fewer installations but expanded scope

The number of installations with open accounts, i.e. those participating in the system, was 11,359 in 2008, which is 213 fewer than in 2007. This reduction resulted from the application of a rule that took many smaller installations out of the system.

Despite this, the volume of emissions covered by the EU ETS expanded to activities with emissions amounting to around 50 million tons of CO₂-equivalent last year due to Member States adopting a more harmonised interpretation of definitions of activities covered. In addition, Iceland, Liechtenstein and Norway joined the EU ETS in 2008 (although at present no installations in Iceland are covered).

High level of compliance

Of all the installations participating in the scheme last year, 0,9% did not surrender the required quantity of allowances by the deadline of 1 May 2009. These installations are typically small and together they account for less than 0,5% of all emission allocations in the EU.

2,2% of the installations, accounting for 0,1% of all emission allocations in the EU failed to submit verified emissions for the year 2008 before 1 May 2009.

Limited use of credits

Last year it was possible for the first time for installations to surrender emission credits generated through the Kyoto Protocol’s flexible mechanisms^[1] in order to offset part of their emissions. CERs accounted for 3.9% of all surrenders. 41% of these originated in China, 31% in India, 15% in South Korea and 7% in Brazil, with a further 14 countries of origin accounting for the remaining 5%.

ERUs accounted for only 0.002% of all surrenders. The combined CER and ERU surrenders in 2008 used up only roughly 6% of the approximately 1.4 billion credits that are allowed over the 2008-2012 trading period.

92% of the surrenders were allowances which had been given to installations for free while the remaining 4.1% of surrenders were of allowances either purchased in auctions or free allowances allocated for 2009.

Background

The second trading period of the EU ETS began on 1 January 2008 and runs for five years until 31 December 2012. This period coincides with the period during which industrialised countries must meet their Kyoto Protocol emission targets. The EU ETS will be substantially reformed for the third trading period, which will start on 1 January 2013 and run until 2020. The legislation revising the Emissions Trading Directive was adopted as part of the EU climate and energy package on 23 April 2009 (IP/09/628).

Under the EU ETS, installations are required to submit their verified emissions data for each year to Member State registries. For 2008 this data became publicly available on the Community Independent Transaction Log (CITL) on 1 April 2009. From 15 May onwards the CITL also displays compliance data, with information on whether installations have complied with their obligations to surrender an amount of allowances equal to last year's verified emissions.

Further information:

The CITL homepage

http://ec.europa.eu/environment/ets/

The registries homepage of DG Environment on EUROPA

http://ec.europa.eu/environment/climat/emission/citl_en.htm

The revised ETS and Frequently Asked Questions

http://ec.europa.eu/environment/climat/emission/ets_post2012_en.htm

Annex

^[1] The Clean Development Mechanism (CDM) generates credits known as Certified Emission Reductions (CERs); credits from the Joint Implementation mechanism are called Emission Reduction Units (ERUs). See

http://ec.europa.eu/environment/climat/emission/linking_en.htm