What are the key features of the European Union Emissions Trading System (EU ETS)?

The key features of the European Union Emissions Trading System (EU ETS) are as follows:

1. Cap and Trade System: The EU ETS operates on a cap and trade system, where a cap is set on the total amount of greenhouse gas emissions allowed by participating industries. This cap is gradually reduced over time to achieve emission reduction targets.

2. Allowance Allocation: Emission allowances are distributed among participating industries, which represent the right to emit a certain amount of greenhouse gases. These allowances can be freely traded among participants, allowing for flexibility in emission reduction efforts.

3. Compliance and Monitoring: Participants are required to surrender enough allowances to cover their actual emissions at the end of each compliance period. Monitoring, reporting, and verification systems are in place to ensure accurate measurement and reporting of emissions.

4. Market-Based Approach: The EU ETS creates a market for emission allowances, where participants can buy or sell allowances based on their emission needs. This market-based approach encourages cost-effective emission reduction strategies and incentivizes innovation.

5. Linking with International Systems: The EU ETS can be linked with other emissions trading systems globally, allowing for the international trading of allowances. This promotes global cooperation in reducing greenhouse gas emissions.

6. Compliance Penalties: Participants failing to surrender enough allowances to cover their emissions are subject to penalties, which can include fines or suspension from the trading system.

7. Expansion to Other Sectors: The EU ETS initially covered energy-intensive industries, but it has expanded to include other sectors such as aviation and maritime transport, further broadening its scope and impact.

8. Review and Revision: The EU ETS is subject to periodic review and revision to ensure its effectiveness in achieving emission reduction targets. This allows for adjustments to be made based on changing circumstances and evolving climate policies.