Understanding the Emissions Trading System Scheme (ETSS)
The Emissions Trading System Scheme (ETSS) is a market-based approach to reducing greenhouse gas emissions. This scheme is a key driver of decarbonisation in energy and industry, putting a price on climate change-inducing CO2 emissions. The ETSS was launched in 2005 and is the world's first carbon market, covering emissions from the electricity and heat generation, industrial processes, and aviation sectors.
Basics of the Emissions Trading System Scheme (ETSS)
- The ETSS is a 'cap and trade' system to reduce emissions via a carbon market.
- An Emissions Trading Scheme (ETS) is a market-based, cost-effective approach to reducing emissions, adopted by countries such as China and the EU.
- The European Union Emissions Trading System (EU ETS) is a carbon emission trading scheme or cap and trade scheme that began in 2005 and is intended to lower greenhouse gas emissions in the EU.
How the Emissions Trading System Scheme (ETSS) Works
Under an ETS, a regulator defines an upper limit (cap) of greenhouse gas emissions that may be emitted in clearly defined sectors of an economy (scope and coverage). Emissions permits or allowances are given out or sold (allocated) to the entities that are included in the ETSS. By the end of a defined time period, each covered entity must surrender a number of permits or allowances equal to their emissions level.
