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| CATEGORIES ABOUT EUROPEAN UNION EMISSION TRADING SCHEME | |
| climate change policies | |
| energy policies and initiatives of the european union | |
| carbon emissions trading schemes | |
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The scheme commenced operation on 1 January 2005, and all 25 member states of the European Union participate in the scheme. In its first year, 362 million tonnes of CO2 were traded on the market for a sum total of €7.2 billion[http://www.pointcarbon.com/wimages/Carbon_2006_final_print.pdf]. The price of allowances has increased more or less steadily to its current level (April 2006) of €26-27 per tonne CO2 [http://www.emissierechten.nl/marktanalyse.htm]. For comparison, companies who at the end of the year have not reduced emissions or purchased enough credits to cover emissions face a fine of €40 per excess tonne of CO2. In the first phase (2005-2007), the EU ETS includes some 12,000 installations, representing approximately 45% of EU CO2 emissions, covering energy activities (combustion installations with a rated thermal input exceeding 20 MW , mineral oil refineries, coke ovens), production and processing of ferrous metals, mineral industry (cement clinker, glass and ceramic bricks) and pulp, paper and board activities. The second phase (2008-12) is to cover not only CO2, but all greenhouse gases. Moreover, CDM and JI credits are expected to be introduced in second phase through the 'Linking Directive'. {Link without Title} The Commission also considers including Aviation in the EU ETS a move considered important due to the large and rapidly growing emissions of the sector. The inclusion of aviation is estimated to lead to an increase in demand of allowances of about 10-12 million tonnes of CO2 per year in phase two. This in turn is expected to lead to an increased use of JI credits from projects in Russia and Ukraine which would offset the increase in prices and eventually resulting in no discernable impact on average annual CO2 prices.[http://www.defra.gov.uk/environment/climatechange/trading/eu/pdf/including-aviation-icf.pdf . Ultimately, the Commission wishes the post-2012 ETS to include all greenhouse gases and all sectors, including aviation, maritime transport and forestry For the transport sector, the large number of individual users adds complexities, but could be implemented either as a cap-and-trade system for fuel suppliers or a baseline-and-credit system for car manufacturers[http://www.naturvardsverket.se/bokhandeln/dse/620-5550-X . National Allocation Plans for the second phase are currently being drafted and are expected to be ready by June 2006. The European Commission suggests that if the ETS is to contribute proportionately to emission cuts, the total number of allowances should be around 6 % lower in phase two than in the first phase. {Link without Title} ENVIRONMENTAL CONSEQUENCES Overall emission reductions In 2004, called the caps a 'major disappointment' {Link without Title} , arguing that only two (UK and Germany) of the 25 EU states asked the participating industry sectors to reduce emissions compared to historic levels and found that in the 15 old EU member states as a whole, allocations were 4,3% higher than the base year. Allocation Most allowances in all countries were given freely (known as grandfathering). This approach has been criticized as being less efficient than auctioning and providing too little incentive for installing clean, renewable energy {Link without Title} , {Link without Title} . The inclusion of sinks Currently, the EU does not allow CO2 credits under ETS to be obtained from Sinks (e.g. reducing CO2 by planting trees). However, some governments and industry representatives lobby for their inclusion. The inclusion is currently opposed by NGO's as well as the EU commission itself, arguing that sinks are surrounded by too many scientific uncertainties over their permanence and that they have inferior long-term contribution to climate change compared to reducing emissions from industrial sources {Link without Title} . SEE ALSO EXTERNAL LINKS
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