European Union Emissions Trading System (EU ETS)

1 Emissions trading is a market-based instrument, which aims to achieve an emission reduction target in a cost-effective way. This is realized by allocating emission entitlements, so-called ‘allowances’, to legal entities who are able to buy and sell them on the market. When allowances are transferred under an increasingly stringent emissions cap, and the balance between supply and demand is such that there is emissions scarcity, emission reductions will be achieved efficiently. 2 The European Union Emissions Trading System (‘EU ETS’), which is one of the pillars...