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Council agrees position on EU ETS

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The Council of the EU has agreed its general negotiating position for the review of the emissions trading system (EU ETS), which is one of the main tools for achieving a 40% reduction in greenhouse gas emissions by 2030.

The Council of the EU has agreed its general negotiating position for the review of the emissions trading system (EU ETS), which is one of the main tools for achieving a 40% reduction in greenhouse gas emissions by 2030. Launched in 2005, the EU ETS works by putting a limit on the total of emissions from high-emitting industry sectors and power plants. Within this limit, which is reduced each year, companies can buy and sell emission allowances. Each allowance gives them the right to emit one tonne of CO2, or the equivalent of another greenhouse gas.

While the default method for allocating emission allowances to companies is by auction, some sectors of receive a free allocation of allowances, based on performance benchmarks which reward best practice in low-emission production.

The Commission presented its proposal for a directive in July 2015. Under the proposal, the sectors covered by the EU ETS have to reduce their emissions by 43% compared to 2005, in order to achieve the 40% EU target. The overall number of emission allowances will decline at an annual rate of 2.2% from 2021 onwards, compared to 1.74% currently. This amounts to an additional emissions reduction in the sectors covered by the ETS of some 556 million tonnes over the decade, equivalent to the annual emissions of the UK.

The proposal now needs to be discussed by the Council and the EU Parliament to agree on a final text.

Issue: 1344
Categories: News , Indirect taxes , VAT
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