Environmental Law Service

Climate Law Database

CCA and Emission trade system (ETS)

The most important issue is the possibility of constituting the Emission Trade System („ETS“ hereinafter) on a national level, which should be compatible with the EU Emission trade system, because the emission allowances trading is one of the most efficient measures how to achieve the CCA`s GHG emission reduction target. We concluded that the general idea of the national ETS is in accordance with the communitarian law. Member States are not prevented from issuing state legal regulations (such as national Climate Change Acts) that would include greenhouse gas emissions sources falling within the scope of EU ETS and they may even divert from certain provisions of the EU ETS Directive when implementing it. However, to ensure that the GHG emissions will be reduced domestically the offsetting of the emission allowances must be prevented.
In general, there is no legal obstacle related to the EU law on ETS that would prevent Member States to establish under CCA a duty to achieve GHG emission reductions targets domestically. This means that Member States can even completely exclude offset reductions from Climate Change Act targets accounting. Since such duty would be typically established to governments (and not to the EU ETS participants), there is no interference with the existing EU law on this subject.

What is the emission trading?

In the context of the EU Emissions Trading Scheme or the mechanisms of the Kyoto Protocol, the emission trading refers to the buying and selling of allowances to emit a defined quantity of greenhouse gases or credits that represent a quantity of greenhouse gas already reduced.