Directive 2003/87 and Directive 2009/29 establishing an Emissions Trading Scheme

The European Union Emissions Trading System (EU ETS) is a cap-and-trade type ETS, with the volume of emission allowances determined top-down and decreasing annually. The EU ETS has been the central pillar of the EU climate change policy since it was introduced in 2005. It is the oldest and largest ETS  operating worldwide. The system has gone through several reforms and with the revised EU ETS Directive entered into force, its fourth phase started in January 2021. As part of the 2023 revisions of the ETS Directive, a new emissions trading system named ETS2 was created, separate from the existing EU ETS. This new system will cover and address the CO2 emissions from fuel combustion in buildings, road transport and additional sectors (mainly small industry not covered by the existing EU ETS). The ETS2 will enter into force in 2027.

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