Environment ministers have reached an agreement to support reforms to the EU Emissions Trading Scheme (EU ETS) for the fourth phase of the scheme.

The EU ETS is a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. The EU ETS works on the “cap and trade” principle. A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances which they can trade with one another as needed.

Under the proposed changes, the overall number of emissions allowances within the scheme will decrease at an annual rate of 2.2% from 2021 onwards, compared to 1.74% at present, in order to solve the excess of allowances currently in the system. Rules to ensure continued protection against carbon leakage were also agreed.

Climate Action Commissioner Miguel Arias Cañete said: “Less than two weeks after the vote by Parliament, today’s agreement demonstrates once more the European Union’s strong commitment to show leadership on climate action and help drive the global transition to clean energy.”

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