EU ETS (EU Emissions Trading Scheme)

The EU ETS is the cornerstone of the European Union's climate policy and the world's largest carbon market. Established in 2005, it operates on a cap-and-trade principle, covering approximately 40% of the EU's greenhouse gas emissions. The system sets a cap on total emissions from covered sectors, which decreases over time to ensure emission reductions. Entities within the system must surrender allowances equal to their emissions, which can be traded to provide flexibility. The EU ETS covers emissions from power generation, energy-intensive industries, and aviation within the European Economic Area, with maritime transport included from 2024. A separate system for buildings and road transport is planned for 2027. The EU ETS is a key instrument in achieving the EU's 2030 climate target and 2050 climate neutrality goal, driving cost-effective emission reductions and fostering innovation in low-carbon technologies.