Emissions and emissions trading scheme

Global - Mar 20 2019
  • #carbon
  • #carbon/climate change
  • #environment

Emissions and emissions trading scheme

With the March 2019 Green Finance Observatory report stating that "carbon markets are likely to be more vulnerable than traditional markets", it is a good time to examine some of the current trends in the European Emissions Trading Scheme (EU ETS).

As a reminder, an emissions trading scheme is a market mechanism that can be used to reduce GHG emissions. The regulatory entity sets a total emissions cap that is applied to one or more sectors of the economy, contributing in this way to the achievement of the national or territorial GHG emissions reduction target. Once the cap is established, the regulatory entity distributes allowances to companies, with each allowance representing one ton of GHG emissions and allocated either free of charge or sold via auctions. Companies in these sectors will then manage their allowances by reducing their emissions, buying excess allowances from other companies, or by covering part of their emissions with carbon credits from reduction projects in sectors not covered by the emissions trading scheme. In the EU, only the stationary installations and aviation sectors are covered by the EU ETS.

In the graph below, let us look at the verified emissions of the different sectors of stationary installations and their free allowances allocated within the EU ETS between 2013 and 2017.

Verified emissions and allocated allowances of stationary installations in the EU ETS

On the left side of the graph, we see that the share of combustion of fuels contributes about two-thirds of the total verified emissions of stationary installations; a large majority of this share is in the power sector. Other emissions from stationary facilities come from four main sectors: refining, steel, cement and bulk chemicals. Emissions for the EU ETS as a whole show a downward trend from 2013 to 2016, but for the first time since 2010, total emissions increased again by 0.6% in 2017, which is explained by an increase of industrial emissions while emissions from combustion remained stable.

On the right-hand side of the graph, we see that the total allocated emissions are not exactly equal to the verified emissions. This illustrates the increasing difficulty of the regulatory entity’s task of allowance allocation in an emissions trading scheme. It can also be seen that during the trading period between 2013 and 2017, approximately more than 50% of the total quantity of allowances are auctioned while the remaining allowances are allocated free of charge; for the refining of mineral oil, almost all the allowances are allocated free of charge.

It should be noted that in other regions of the world other sectors are covered by the local emissions trading systems. For example, in South Korea and New Zealand, the construction, transport and waste sectors are covered in addition to the sectors covered in the EU ETS.

Félix Fouret, Carbon/Climate Analyst
Source: Beyond Ratings, Green Finance Observatory, European Environment Agency

Our latest
publications

Title
Category
Tag
Country
Date
Analyst insight
#ESG
Global
2019-10-20
Analyst insight
#Carbon #ESG
Global
2019-10-20
Analyst insight
#ESG
Global
2019-10-20
Research note
#ESG
Global
2019-10-20
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#ESG
Global
2019-10-20
Weekly food for thought
#ESG
France
2019-10-20
Analyst insight
#Credit Risk #ESG
Global
2019-10-20
Weekly food for thought
#Carbon/Climate Change #Environment
Global
2019-10-20
Weekly food for thought
#ESG
Global
2019-10-20
Weekly food for thought
#ESG
France
2019-10-20
Analyst insight
#Carbon
Europe
2019-10-20
Weekly food for thought
#Carbon
Global
2019-10-20
Weekly food for thought
#ESG
Global
2019-10-20
Weekly food for thought
#Credit Risk
United States
2019-10-20
Analyst insight
#Environment
Northern Area
2019-10-20
Weekly food for thought
#Carbon/Climate Change
Europe
2019-10-20
Weekly food for thought
#ESG
France
2019-10-20
Weekly food for thought
#Credit Risk
Peru
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change
World
2019-10-20
Weekly food for thought
#ESG
France
2019-10-20
Weekly food for thought
#Credit Risk #GDP
Europe
2019-10-20
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#ESG
Global
2019-10-20
Weekly food for thought
#Credit Risk
France
2019-10-20
Analyst insight
#Credit Risk #France
Europe
2019-10-20
Weekly food for thought
#ESG
Global
2019-10-20
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#ESG
Global
2019-10-20
Weekly food for thought
#GDP
Europe
2019-10-20
Analyst insight
#ESG
Global
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#Carbon #ESG
France
2019-10-20
Weekly food for thought
#Credit Risk
Global
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#ESG
Europe, USA
2019-10-20
Weekly food for thought
#GDP
France
2019-10-20
Analyst insight
#Environment
France
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#Carbon/Climate Change #ESG
Global
2019-10-20
Weekly food for thought
#Credit Risk #GDP
China
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#ESG
USA
2019-10-20
Weekly food for thought
#GDP
Global
2019-10-20
Analyst insight
#Credit Risk #Sovereign Debt
Global
2019-10-20
Weekly food for thought
#Carbon #Climate #IPCC #WMO
Global
2019-10-20
Weekly food for thought
#Carbon #Inequality #Paris Agreement
France
2019-10-20
Weekly food for thought
#GDP #Sovereign Debt
Italy
2019-10-20
Analyst insight
#Credit Risk #GDP #Geopolitics #Sovereign Debt
Global
2019-10-20
Weekly food for thought
#Environment
Global
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #GDP
Global
2019-10-20
Weekly food for thought
#GDP
France
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #Environment
Global
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate #Environment
Global
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate #Environment
Global
2019-10-20
Analyst insight
#GDP
Brasil
2019-10-20
Weekly food for thought
#Environment
Venezuela
2019-10-20
Weekly food for thought
#Environment #Natural Capital
Norway
2019-10-20
Analyst insight
#Carbon #Carbon/Climate Change #Climate
United Kingdom
2019-10-20
Weekly food for thought
#Agriculture #Biodiversity #Climate #GHG #Greenhouse gases
Global
2019-10-20
Weekly food for thought
#Biodiversity #Climate #Environment #ESG #IPCC #Oceans #SIDS
Global
2019-10-20
Weekly food for thought
#Credit Risk #GDP
France
2019-10-20
Weekly food for thought
#Carbon/Climate Change
Europe
2019-10-20
Weekly food for thought
#Carbon/Climate Change
France, Canada
2019-10-20
Weekly food for thought
#Credit Risk #GDP
Argentina
2019-10-20
Analyst insight
France, Egypt
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate
France
2019-10-20
Weekly food for thought
#GDP #Sovereign Debt
Germany
2019-10-20
Weekly food for thought
#Environment #ESG
Global
2019-10-20
Analyst insight
#GDP #Natural Capital #Sovereign Debt
South Africa, France
2019-10-20
Weekly food for thought
#Credit Risk #Sovereign Debt
United States
2019-10-20
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-20
Weekly food for thought
#Carbon/Climate Change #Environment #ESG
Global
2019-10-20
Weekly food for thought
#Carbon/Climate Change #Climate
Global
2019-10-20
Weekly food for thought
#ESG
India
2019-10-20
Weekly food for thought
#Credit Risk #GDP
USA, Japan, European Union
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #GDP #Paris Agreement #Sovereign Debt
Global
2019-10-20
Weekly food for thought
#Climate #Environment #Paris Agreement
Small Island Developing States, Global, Barbados, Fiji
2019-10-20
Weekly food for thought
#Credit Risk #GDP #Sovereign Debt
Venezuela
2019-10-20
Analyst insight
#Carbon #Carbon/Climate Change #Climate #Credit Risk
Global
2019-10-20
Analyst insight
Global
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate
Global
2019-10-20
Weekly food for thought
#Credit Risk #GDP
Global
2019-10-20
Analyst insight
#Biodiversity #Environment #Natural Capital
Brazil
2019-10-20
Weekly food for thought
#Credit Risk #Sovereign Debt
United States
2019-10-20
Weekly food for thought
#Carbon/Climate Change
Global
2019-10-20
Analyst insight
#Credit Risk #Sovereign Debt
United States
2019-10-20
Analyst insight
#Carbon/Climate Change #Credit Risk #ESG #Natural Capital
Global
2019-10-20
Analyst insight
#Carbon #Carbon/Climate Change
Europe
2019-10-20
Weekly food for thought
#Carbon #Carbon/Climate Change #Climate #Paris Agreement
France
2019-10-20
Weekly food for thought
#Credit Risk #Sovereign Debt
Europe
2019-10-20
Weekly food for thought
Global
2019-10-20
Analyst insight
Global
2019-10-20
Weekly food for thought
France
2019-10-20
Weekly food for thought
#Carbon/Climate Change #ESG
Global
2019-10-20
Weekly food for thought
Global
2019-10-20
Weekly food for thought
Global
2019-10-20
Weekly food for thought
Global
2019-10-20
Analyst insight
#Biodiversity #Climate #Environment #Natural Capital #Paris Agreement
Global
2019-10-20
Weekly food for thought
United States
2019-10-20
Weekly food for thought
Italy
2019-10-20
Weekly food for thought
Global
2019-10-20
Analyst insight
Middle East & North Africa
2019-10-20
Weekly food for thought
Global
2019-10-20
Weekly food for thought
Global
2019-10-20
Research note
#Carbon #Carbon/Climate Change #Climate #Paris Agreement
Global
2019-10-20
Weekly food for thought
Global
2019-10-20
Analyst insight
All
2019-10-20
Weekly food for thought
United States
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
#Carbon/Climate Change #Climate #Credit Risk
England
2019-10-20
Weekly food for thought
Global
2019-10-20
Weekly food for thought
Germany
2019-10-20
Analyst insight
Brazil
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
Italia
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
Canada
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Analyst insight
Sweden
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
Italia
2019-10-20
Analyst insight
All
2019-10-20
Weekly food for thought
USA
2019-10-20
Analyst insight
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
United Kingdom
2019-10-20
Weekly food for thought
United Kingdom
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Research note
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
Russia
2019-10-20
Analyst insight
Argentina
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
European Union
2019-10-20
Analyst insight
European Union
2019-10-20
Analyst insight
Greece
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
European Union
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
Cuba
2019-10-20
Weekly food for thought
All
2019-10-20
Analyst insight
Greece
2019-10-20
Weekly food for thought
European Union
2019-10-20
Weekly food for thought
French Guyana
2019-10-20
Weekly food for thought
#Sovereign Debt
Russia
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
Venezuela
2019-10-20
Analyst insight
All
2019-10-20
Weekly food for thought
United Kingdom
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
France
2019-10-20
Weekly food for thought
European Union
2019-10-20
Weekly food for thought
All
2019-10-20
Weekly food for thought
France
2019-10-20

Let's keep in touch!

This field is required
Invalid email

Register to our newsletter to be the first to hear about ...

By submitting this form, you consent to receiving email communications from Beyond Ratings. Beyond Ratings will update your email preferences and hold your details in its contact database. For more information on how Beyond Ratings uses your data, see our Privacy Policy.

Get started

More investors are choosing Beyond Ratings' proprietary ESG-augmented financial metrics to gain a 360° view of company and country ESG performance.