Sistema de trading Force System

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Elder Impulse System – indicador para MetaTrader 5

Sistema de impulso para barras de precios

  • Barra alcista de precios: (EMA de 13 períodos > EMA anterior de 13 períodos) y (histograma de MACD > histograma de MACD del período anterior)
  • Barra bajista de precios: (EMA de 13 períodos El indicador Elder Impulse System identifica los momentos cuando la tendencia se acelera o desacelera. El sistema de impulso se basa en dos indicadores: la media móvil exponencial durante varios días y el histograma de MACD. La media móvil identifica la tendencia, mientras que el histograma de MACD mide el impulso. Como resultado, el sistema Elder Impulse combina el seguimiento de la tendencia y el momentum, y gracias a eso, muestra los impulsos para el trading.

Traducción del inglés realizada por MetaQuotes Software Corp.
Artículo original:

Indicador de la dirección y de la fuerza de la tendencia

Indicador suavizado de la dirección y la fuerza de la tendencia

Es la versión ampliada del oscilador PIvot.

iTrend es un indicador muy bien conocido, pero para los cálculos se utiliza ADXVMA.

Golden jubilee of the multilateral trading system

This year, 1998, marks the fiftieth anniversary of the operation of the multilateral trading system, formerly known as the GATT which was later superseded by the World Trade Organization (WTO). Below is a short statement from Renato Ruggiero, Director-General of the WTO, regarding this anniversary:

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“The multilateral trading system continues to grow in scope and credibility. Currently, there are 132 member governments, with an additional 30 negotiating their terms of membership. It would be difficult to overstate the contribution the WTO makes to growth and development on a world scale.

“On 20 May 1998, we will hold a high profile celebration in Geneva to mark the Golden Jubilee and highlight for the citizens of the world the contribution this system has made to global peace and prosperity.»

Note to Editors:

Attached is a brief chronology of some of the more significant events and achievements in the life of the multilateral trading system so far.

GATT/WTO chronology

1947 The birth of GATT. On 30 October 1947, the General Agreement on Tariffs and Trade (GATT) was signed by 23 nations – twelve developed and eleven developing economies – at the Palais des Nations in Geneva. The Agreement contained tariff concessions agreed to during the first multilateral trade negotiations and a set of rules designed to prevent these concessions from being frustrated by restrictive trade measures.

The genesis of GATT. In 1946, the newly-created Economic and Social Council of the United Nations called a conference to consider the creation of the International Trade Organization (ITO) which was envisaged as the final leg of a triad of post-War economic agencies (the other two were the International Monetary Fund and the International Bank for Reconstruction and Development -later the World Bank). A preparatory committee was established to draft the ITO charter.

During 1946-1947, the committee worked on the draft charter. However, independent of this official task under the UN mandate, the committee members conducted tariff-cutting negotiations among themselves in advance of the ITO. These negotiations resulted in about 45,000 tariff concessions affecting some US$ 10 billion of world trade.

The committee members also agreed to protect the value of the tariff concessions by early acceptance of some of the trade rules of the draft ITO charter. Thus, tariff concessions and trade rules together became known as the General Agreement on Tariffs and Trade (GATT) which was signed on 30 October 1947 by 23 countries as an interim measure.

In November 1947, delegations from 56 countries met in Havana, Cuba, to consider the ITO draft as a whole. After long and difficult negotiations, some 53 countries signed the Final Act authenticating the text of the Havana Charter in March 1948. There was no commitment, however, from governments to ratification and, in the end, the ITO was stillborn, leaving GATT as the only international instrument governing the conduct of world trade.

1948 Entry into force. On 1 January 1948, GATT entered into force. The 23 founding members were: Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United Kingdom and the United States.

The first real business of the GATT was conducted by the First Session of Contracting Parties which began on 28 February 1948 and ended on 20 March 1948 in Havana, Cuba. The secretariat of the Interim Commission for the ITO, which served as the ad hoc secretariat of GATT, moved from Lake Placid, New York, to Geneva in 1948.

1949 Second Round at Annecy. During the second Round of trade negotiations, held from April to August at Annecy, France, the contracting parties exchanged some 5,000 tariff concessions. At their third Session, they also dealt with the accession of ten more countries.

1950 Third Round at Torquay. From September 1950 to April 1951, the contracting parties exchanged some 8,700 tariff concessions in the English town, yielding tariff reductions of about 25 per cent in relation to the 1948 level. Four more countries acceded to GATT. During the fifth Session of the Contracting Parties, the United States indicated that the ITO Charter would not be re-submitted to the US Congress; this, in effect, meant that ITO would not come into operation.

1956 Fourth Round at Geneva. The fourth Round was completed in May and produced some $2.5 billion worth of tariff reductions. At the beginning of the year, the GATT commercial policy course for officials of developing countries was inaugurated.

1960 The Dillon Round. The fifth Round opened in September and was divided into two phases: the first was concerned with negotiations with EEC member states for the creation of a single schedule of concessions for the Community based on its Common External Tariff; and the second was a further general round of tariff negotiations. Named in honour of US Under- Secretary of State Douglas Dillon who proposed the negotiations, the Round was concluded in July 1962 and resulted in about 4,400 tariff concessions covering $4.9 billion of trade.

1961 The Short-Term Arrangement covering cotton textiles was agreed as an exception to the GATT rules. The arrangement permitted the negotiation of quota restrictions affecting the exports of cotton-producing countries. In 1962 the «Short-term» Arrangement became the «Long-term» Arrangement, lasting until 1974 when the Multifibre Arrangement entered into force.

1964 The Kennedy Round. Meeting at Ministerial level, a Trade Negotiations Committee formally opened the Kennedy Round in May. In June 1967, the Round’s Final Act was signed by some 50 participating countries which together accounted for 75 per cent of world trade. For the first time, negotiations departed from the product-by-product approach used in the previous Rounds to an across-the-board or linear method of cutting tariffs for industrial goods. The working hypothesis of a 50 per cent target cut in tariff levels was achieved in many areas. Concessions covered an estimated total value of trade of about $40 billion. Separate agreements were reached on grains, chemical products and a Code on Anti-Dumping.

1965 A New Chapter. The early 1960s marked the accession to the General Agreement of many newly-independent developing countries. In February, the Contracting Parties, meeting in a special session, adopted the text of Part IV on Trade and Development. The additional chapter to the GATT required developed countries to accord high priority to the reduction of trade barriers to products of developing countries. A Committee on Trade and Development was established to oversee the functioning of the new GATT provisions. In the preceding year, GATT had established the International Trade Centre (ITC) to help developing countries in trade promotion and identification of potential markets. Since 1968, the ITC has been jointly operated by GATT (later the WTO) and the UN Conference on Trade and Development (UNCTAD).

1973 The Tokyo Round. The seventh Round was launched by Ministers in September at the Japanese capital. Some 99 countries participated in negotiating a comprehensive body of agreements covering both tariff and non-tariff matters. At the end of the Round in November 1979, participants exchanged tariff reductions and bindings which covered more than $300 billion of trade. As a result of these cuts, the weighted average tariff on manufactured goods in the world’s nine major industrial markets declined from 7.0 to 4.7 per cent. Agreements were reached in the following areas: subsidies and countervailing measures, technical barriers to trade, import licensing procedures, government procurement, customs valuation, a revised anti-dumping code, trade in bovine meat, trade in dairy products and trade in civil aircraft. The first concrete result of the Round was the reduction of import duties and other trade barriers by industrial countries on tropical products exported by developing countries.

1974 On 1 January 1974, the Arrangement Regarding International Trade in Textiles, otherwise known as the Multifibre Arrangement (MFA), entered into force. It superseded the arrangements that had been governing trade in cotton textiles since 1961. The MFA sought to promote the expansion and progressive liberalization of trade in textile products while at the same time avoiding disruptive effects in individual markets and lines of production. The MFA was extended in 1978, 1982, 1986, 1991 and 1992.

1986 The Uruguay Round. GATT Trade Ministers meeting at Punta del Este, Uruguay, launched the eighth Round of trade negotiations on 20 September. Envisaged to last four years, negotiations were held in Geneva, Switzerland, and continued for some seven and a half years covering the most wide-ranging and ambitious agenda of any Round so far.

1993 Successful Conclusion of the Uruguay Round negotiations on 15 December 1993 in Geneva, Switzerland.

1994 The Final Act of the Uruguay Round signed by Ministers on 15 April 1994 in Marrakesh, Morocco. Results included average tariff cuts of 40% on industrial products; an average increase in the percentage of tariff bindings from 21% to 73% (for developing countries), from 78% to 99% (for developed countries), and from 73% to 98% (for transition economies); a comprehensive programme of agricultural reform, including liberalization commitments on tariffs, domestic support and export subsidies, and the replacement of all quantitative restrictions and other non-tariff measures by tariffs; a phase-out of export restrictions and enhanced market access for textiles and clothing; strengthened agreements on safeguards, technical barriers, customs valuation, import licensing, state-trading, subsidies, and anti-dumping and countervailing. The results also produced new agreements on such areas as trade in services, intellectual property rights, sanitary and phytosanitary measures, and trade-related investment measures. The Uruguay Round results also transformed the provisional multilateral trading system which had existed under the GATT into the permanent World Trade Organization with a significantly strengthened legal mechanism for resolving trade disputes multilaterally.

1995 Entry into force of the World Trade Organization on 1 January 1995.

On 31 May 1995, WTO General Council approved the Headquarters Agreement with the Swiss Confederation, including the decision to locate the WTO in Geneva.

Financial services accord reached on 28 July 1995, with governments agreeing to negotiate further liberalization at the end of 1997.

1996 Basic telecommunications negotiations are suspended in May 1996 in spite of substantial offers. Governments participating agreed to preserve the offer and to re-examine them during a 30-day period beginning 15 January 1997.

1996 Maritime transport services negotiations suspended in July 1996. Members participating in the negotiations agreed to suspend the negotiations and to resume them, on the basis of existing or improved offers, at the time of the further round of comprehensive negotiations on trade in services mandated to begin in the year 2000.

First WTO Ministerial Conference held in Singapore, 9-13 December 1996. Among the major conclusions of the Conference was the establishment of three working groups, respectively, on trade and investment, trade and competition policy, and transparency in government procurement, plus a mandate to conduct a study on trade facilitation.

1997 Successful conclusion of negotiations on basic telecommunications services on 15 February 1997. Sixty-nine governments agreed to wide-ranging liberalization measures. Domestic and international revenue generated in the basic telecommunications sector roughly amounts to US$600 billion annually. The agreement entered into force on 5 February 1998.

1997 On 26 March 1997, forty governments agreed to cut customs duties on information technology products, beginning on 1 July 1997 and with the aim of eliminating all duties on these products by 2000. International trade in these products amounts to some US$600 billion annually.

1997 Successful conclusion of negotiations on financial services on 12 December 1997. Seventy governments reached a multilateral agreement to open their financial services sectors, covering more than 95 per cent of trade in banking, insurance, securities and financial information. The agreement will enter into force on 1 March 1999.

EU Emissions Trading System (EU ETS)

The EU Emissions Trading System explained

The EU emissions trading system (EU ETS) is a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. It is the world’s first major carbon market and remains the biggest one.

  • operates in all EU countries plus Iceland, Liechtenstein and Norway
  • limits emissions from more than 11,000 heavy energy-using installations (power stations & industrial plants) and airlines operating between these countries
  • covers around 45% of the EU’s greenhouse gas emissions.

A ‘cap and trade’ system

The EU ETS works on the ‘cap and trade’ principle.

A cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall.

Within the cap, companies receive or buy emission allowances, which they can trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world. The limit on the total number of allowances available ensures that they have a value.

After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances.

Trading brings flexibility that ensures emissions are cut where it costs least to do so. A robust carbon price also promotes investment in clean, low-carbon technologies.

Developing the carbon market

Set up in 2005, the EU ETS is the world’s first international emissions trading system.

The EU ETS is also inspiring the development of emissions trading in other countries and regions. The EU aims to link the EU ETS with other compatible systems.

Delivering emissions reductions

The EU ETS has proved that putting a price on carbon and trading in it can work. Emissions from installations in the system are falling as intended (see 2020 figures).

In 2020, emissions from sectors covered by the system will be 21% lower than in 2005. The EU is on track to surpass this target.

In 2030, emissions from sectors covered by the EU ETS will be cut by 43% from 2005 levels, as part of the EU’s current 2030 climate and energy framework.

Under the European Green Deal, the Commission will present an impact-assessed plan to increase the EU’s greenhouse gas emission reduction target in a responsible way, including for the EU ETS.

Sectors and gases covered

The system covers the following sectors and gases, focusing on emissions that can be measured, reported and verified with a high level of accuracy:

  • carbon dioxide (CO2) from
    • power and heat generation
    • energy-intensive industry sectors including oil refineries, steel works and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids and bulk organic chemicals
    • commercial aviation
  • nitrous oxide (N2O) from production of nitric, adipic and glyoxylic acids and glyoxal
  • perfluorocarbons (PFCs) from aluminium production

Participation in the EU ETS is mandatory for companies in these sectors, but

  • in some sectors only plants above a certain size are included
  • certain small installations can be excluded if governments put in place fiscal or other measures that will cut their emissions by an equivalent amount
  • in the aviation sector, until 31 December 2023 the EU ETS will apply only to flights between airports located in the European Economic Area (EEA).

Key features of phase 3 (2020)

The EU ETS is now in its third phase, which is significantly different from phases 1 and 2.

The main changes from the previous two phases are:

  • A single, EU-wide cap on emissions applies in place of the previous system of national caps
  • Auctioning is the default method for allocating allowances (instead of free allocation), and harmonised allocation rules apply to the allowances still given away for free
  • More sectors and gases included
  • 300 million allowances set aside in the New Entrants Reserve to fund the deployment of innovative, renewable energy technologies and carbon capture and storage through the NER 300 programme

Key features of phase 4 (2021-2030)

The legislative framework of the EU ETS for its next trading period (phase 4) was revised in early 2020 to enable it to achieve the EU’s 2030 emission reduction targets and as part of the EU’s contribution to the Paris Agreement.

The revision focuses on:

  • Strengthening the EU ETS as an investment driver by increasing the pace of annual reductions in allowances to 2.2% as of 2021 and reinforcing the Market Stability Reserve (the mechanism established by the EU in 2020 to reduce the surplus of emission allowances in the carbon market and to improve the EU ETS’s resilience to future shocks)
  • Continuing the free allocation of allowances as a safeguard for the international competitiveness of industrial sectors at risk of carbon leakage, while ensuring that the rules for determining free allocation are focused and reflect technological progress
  • Helping industry and the power sector to meet the innovation and investment challenges of the low-carbon transition via several low-carbon funding mechanisms

EU ETS Handbook

For more information on the EU ETS, see the EU ETS Handbook. Please note that the information contained in the handbook reflects the status quo at the time of its publication in 2020.

Main EU ETS legislation

  • 08/04/2020 – Consolidated version of Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC
  • 19/03/2020 – Directive (EU) 2020/410 of the European Parliament and of the Council of 14 March 2020 amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2020/1814 (Text with EEA relevance)
  • 23/04/2009 – Directive 2009/29/EC of the European Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community
  • 19/11/2008 – Directive 2008/101/EC of the European Parliament and of the Council amending Directive 2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the Community
  • 27/10/2004 – Directive 2004/101/EC of the European Parliament and of the Council amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol’s project mechanisms
  • 13/10/2003 – Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC

Brexit preparedness notices

  • 06/02/2020 – Commission Regulation (EU) 2020/741 – List of aircraft operators which performed an aviation activity listed in Annex I specifying the administering Member State for each aircraft operator – To become applicable only in case Regulation (EC) No 748/2009 ceases to apply to and in the United Kingdom pursuant to Article 50(3) of the Treaty on European Union
  • 19/12/2020 – Emissions trading system

Carbon market reports

  • 31/10/2020 – COM(2020) 557 – Report on the functioning of the European carbon market
  • 17/12/2020 – COM(2020) 842 – Report on the functioning of the European carbon market
  • 23/11/2020 – COM(2020) 693 – Report on the functioning of the European carbon market
  • 01/02/2020 – COM(2020) 48 – Report on the functioning of the European carbon market
  • 18/11/2020 – COM(2020) 576 – Report on the functioning of the European carbon market
  • 14/11/2020 – COM(2020) 652 – The state of the European carbon market in 2020

Revision of the EU ETS for phase 3

  • 04/02/2020 – European Council conclusions of 4 February 2020 (see conclusions 23 and 24)
  • 18/03/2020 – Guidance on interpretation of Annex I of the EU ETS Directive (excl. aviation activities)
  • 06/04/2009 – Council press release on the adoption of the climate and energy package
  • 12/12/2008 – Presidency conclusions of the European Council (11 and 12 December 2008)
  • 12/12/2008 – European Council Statement on the use of auction revenues
  • 23/01/2008 – Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading system of the Community
  • 23/01/2008 – Commission staff working document – Accompanying document to the Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the EU greenhouse gas emission allowance trading system – Impact assessment


  • 04/07/2020 – Amended Draft Regulation on determining international credit entitlements
  • 05/06/2020 – Draft regulation on determining international credit entitlements
  • 05/05/2020 Commission Regulation (EU) No 389/2020 of 2 May 2020 establishing a Union Registry pursuant to Directive 2003/87/EC of the European Parliament and of the Council, Decisions No 280/2004/EC and No 406/2009/EC of the European Parliament and of the Council and repealing Commission Regulations (EU) No 920/2020 and No 1193/2020 Text with EEA relevance
  • 18/11/2020 – Commission Regulation establishing a Union Registry for the trading period commencing on 1 January 2020, and subsequent trading periods, of the Union emissions trading scheme pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision 280/2004/EC of the European Parliament and of the Council and amending Regulations (EC) No 2216/2004 and (EU) No 920/2020 – not yet published in the Official Journal
  • 07/10/2020 – Commission Regulation (EU) No 920/2020 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No 280/2004/EC of the European Parliament and of the Council – version not including changes brought by Regulation of 18 November 2020
  • 08/10/2008 – Commission Regulation (EC) No 994/2008 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and of the Council and Decision No 280/2004/EC of the European Parliament and of the Council – version applicable until 31 December 2020
  • 26/10/2007 – EEA Joint Committee Decision No 146/2007 linking the EU ETS with Norway, Iceland and Liechtenstein
  • 13/11/2006 – Commission Decision 2006/780/EC on avoiding DOUBLE COUNTING of greenhouse gas emission reductions under the Community emissions trading scheme for project activities under the Kyoto Protocol pursuant to Directive 2003/87/EC of the European Parliament and of the Council (notified under document number C(2006) 5362)
  • 21/12/2004 – Consolidated version of Commission Regulation (EC) No 2216/2004 for a standardised and secured system of registries amended by Commission Regulation (EC) No 916/2007 of 31 July 2007, Commission Regulation (EC) No 994/2008 of 8 October 2008 and Commission Regulation (EU) No 920/2020 of 7 October 2020 – version not including changes brought by Regulation of 18 November 2020

Application of VAT

Legislative History of Directive 2003/87/EC

Work prior to the Commission proposal

  • 08/02/2000 – COM(2000) 87 – Green Paper on greenhouse gas emissions trading within the European Union
  • Mandate and results of ECCP Working Group 1 : Flexible mechanisms
  • 04/09/2001 – Chairman’s Summary Record of Stakeholder consultation meeting (with Industry and Environmental NGOs)
  • 19/05/1999 – COM(1999) 230 – Preparing for Implementation of the Kyoto Protocol
  • 03/06/1998 – COM(1998) 353 – Climate Change – Towards an EU Post-Kyoto Strategy
  • Scope of the EU ETS:
    • 07/2007 – Small Installations within the EU Emissions Trading System
    • 10/2006 – Inclusion of additional activities and gases into the EU Emissions Trading System
  • Further harmonisation and increased predictability:
    • 12/2006 – The approach to new entrants and closures
    • 10/2006 – Auctioning of CO2 emission allowances in the EU ETS
    • 10/2006 – Harmonisation of allocation methodologies
  • 12/2006 – Report on international competitiveness
  • ECCP working group on emissions trading on the review of the EU ETS
    • 15/06/2007 – Final report of the 4th meeting on Linking with Emission Trading Systems in Third Countries
    • 22/05/2007 – Final report of the 3rd meeting on Further Harmonisation and Increased Predictability
    • 26/04/2007 – Final Report of the 2nd meeting on Robust Compliance and Enforcement
    • 09/03/2007 – Final Report of the 1st meeting on The Scope of the Directive

Commission proposal of October 2001

  • 22/01/2002 – Non-paper on synergies between the EC emissions trading proposal (COM(2001)581) and the IPPC Directive
  • 23/10/2001 – COM(2001) 581 – Proposal for a framework Directive for greenhouse gas emissions trading within the European Community

Commission’s reaction to reading of the proposal in Council and Parliament (including Council’s common position)

  • 18/07/2003 – COM(2003) 463 – Opinion of the Commission on the European Parliament’s amendments to the Council’s common position regarding the proposal for a Directive of the European Parliament and of the Council
  • 20/06/2003 – COM(2003) 364 – Commission Communication to the European Parliament concerning the Council’s Common Position on the adoption of a Directive establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC
  • 18/03/2003 – Common Position (EC) No 28/2003 – Council’s Common Position on the adoption of a Directive establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC
  • 27/11/2002 – COM(2002) 680 – Amended proposal for a directive of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC


Open all questions

Questions and Answers on the revised EU Emissions Trading System (December 2008)

What is the aim of emissions trading?

The aim of the EU Emissions Trading System (EU ETS) is to help EU Member States achieve their commitments to limit or reduce greenhouse gas emissions in a cost-effective way. Allowing participating companies to buy or sell emission allowances means that emission cuts can be achieved at least cost.

The EU ETS is the cornerstone of the EU’s strategy for fighting climate change. It is the first international trading system for CO2 emissions in the world and has been in operation since 2005. As of I January 2008 it applies not only to the 27 EU Member States, but also to the other three members of the European Economic Area – Norway, Iceland and Liechtenstein. It currently covers over 10,000 installations in the energy and industrial sectors which are collectively responsible for close to half of the EU’s emissions of CO2 and 40% of its total greenhouse gas emissions. An amendment to the EU ETS Directive agreed in July 2008 will bring the aviation sector into the system from 2020.

How does emissions trading work?

The EU ETS is a ‘cap and trade’ system, that is to say it caps the overall level of emissions allowed but, within that limit, allows participants in the system to buy and sell allowances as they require. These allowances are the common trading ‘currency’ at the heart of the system. One allowance gives the holder the right to emit one tonne of CO2 or the equivalent amount of another greenhouse gas. The cap on the total number of allowances creates scarcity in the market.

In the first and second trading period under the scheme, Member States had to draw up national allocation plans (NAPs) which determine their total level of ETS emissions and how many emission allowances each installation in their country receives. At the end of each year installations must surrender allowances equivalent to their emissions. Companies that keep their emissions below the level of their allowances can sell their excess allowances. Those facing difficulty in keeping their emissions in line with their allowances have a choice between taking measures to reduce their own emissions – such as investing in more efficient technology or using less carbon-intensive energy sources – or buying the extra allowances they need on the market, or a combination of the two. Such choices are likely to be determined by relative costs. In this way, emissions are reduced wherever it is most cost-effective to do so.

How long has the EU ETS been operating?

The EU ETS was launched on 1 January 2005. The first trading period ran for three years to the end of 2007 and was a ‘learning by doing’ phase to prepare for the crucial second trading period. The second trading period began on 1 January 2008 and runs for five years until the end of 2020. The importance of the second trading period stems from the fact that it coincides with the first commitment period of the Kyoto Protocol, during which the EU and other industrialised countries must meet their targets to limit or reduce greenhouse gas emissions. For the second trading period EU ETS emissions have been capped at around 6.5% below 2005 levels to help ensure that the EU as a whole, and Member States individually, deliver on their Kyoto commitments.

What are the main lessons learned from experience so far?

The EU ETS has put a price on carbon and proved that trading in greenhouse gas emissions works. The first trading period successfully established the free trading of emission allowances across the EU, put in place the necessary infrastructure and developed a dynamic carbon market. The environmental benefit of the first phase may be limited due to excessive allocation of allowances in some Member States and some sectors, due mainly to a reliance on emission projections before verified emissions data became available under the EU ETS. When the publication of verified emissions data for 2005 highlighted this “over-allocation”, the market reacted as would be expected by lowering the market price of allowances. The availability of verified emissions data has allowed the Commission to ensure that the cap on national allocations under the second phase is set at a level that results in real emission reductions.

Besides underlining the need for verified data, experience so far has shown that greater harmonisation within the EU ETS is imperative to ensure that the EU achieves its emissions reductions objectives at least cost and with minimal competitive distortions. The need for more harmonisation is clearest with respect to how the cap on overall emission allowances is set.

The first two trading periods also show that widely differing national methods for allocating allowances to installations threaten fair competition in the internal market. Furthermore, greater harmonisation, clarification and refinement are needed with respect to the scope of the system, the access to credits from emission-reduction projects outside the EU, the conditions for linking the EU ETS to emissions trading systems elsewhere and the monitoring, verification and reporting requirements.

What are the main changes to the EU ETS and as of when will they apply?

The agreed design changes will apply as of the third trading period, i.e. January 2020. While preparatory work will be initiated immediately, the applicable rules will not change until January 2020 to ensure that regulatory stability is maintained.

The EU ETS in the third period will be a more efficient, more harmonised and fairer system.

Increased efficiency is achieved by means of a longer trading period (8 years instead of 5 years), a robust and annually declining emissions cap (21% reduction in 2020 compared to 2005) and a substantial increase in the amount of auctioning (from less than 4% in phase 2 to more than half in phase 3).

More harmonisation has been agreed in many areas, including with respect to the cap-setting (an EU-wide cap instead of the national caps in phases 1 and 2) and the rules for transitional free allocation.

The fairness of the system has been substantially increased by the move towards EU-wide free allocation rules for industrial installations and by the introduction of a redistribution mechanism that entitles new Member States to auction more allowances.

How does the final text compare to the initial Commission proposal?

The climate and energy targets agreed by the 2007 Spring European Council have been maintained and the overall architecture of the Commission’s proposal on the EU ETS remains intact. That is to say that there will be one EU-wide cap on the number of emission allowances and this cap will decrease annually along a linear trend line, which will continue beyond the end of the third trading period (2020). The main difference as compared to the proposal is that auctioning of allowances will be phased in more slowly.

What are the main changes compared to the Commission’s proposal?

In summary, the main changes that have been made to the proposal are as follows:

  • Certain Member States are allowed an optional and temporary derogation from the rule that no allowances are to be allocated free of charge to electricity generators as of 2020. This option to derogate is available to Member States which fulfil certain conditions related to the interconnectivity of their electricity grid, share of a single fossil fuel in electricity production, and GDP/capita in relation to the EU-27 average. In addition, the amount of free allowances that a Member State can allocate to power plants is limitedto 70% of carbon dioxide emissions of relevant plants in phase 1 and declines in the years thereafter. Furthermore free allocation in phase 3 can only be given to power plants that are operational or under construction no later than end 2008. See reply to question 15 below.
  • There will be more details in the Directive on the criteria to be used to determine the sectors or sub-sectors deemed to be exposed to a significant risk of carbon leakage, and an earlier date of publication of the Commission’s list of such sectors (31 December 2009). Moreover, subject to review when a satisfactory international agreement is reached, installations in all exposed industries will receive 100% free allowances to the extent that they use the most efficient technology. The free allocation to industry is limited to the share of these industries’ emissions in total emissions in 2005 to 2007. The total number of allowances allocated for free to installations in industry sectors will decline annually in line with the decline of the emissions cap.
  • Member States may also compensate certain installations for CO2 costs passed on in electricity prices if the CO2 costs might otherwise expose them to the risk of carbon leakage. The Commission has undertaken to modify the Community guidelines on state aid for environmental protection in this respect. See reply to question 15 below.
  • The level of auctioning of allowances for non-exposed industry will increase in a linear manner as proposed by the Commission, but rather than reaching 100% by 2020 it will reach 70%, with a view to reaching 100% by 2027.
  • As foreseen in the Commission’s proposal, 10% of theallowances for auctioningwill be redistributed from Member States with high per capita income to those with low per capita income in order to strengthen the financial capacity of the latter to invest in climate friendly technologies. A provision has been added for another redistributive mechanism of 2% of auctioned allowances to take into account Member States which in 2005 had achieved a reduction of at least 20% in greenhouse gas emissions compared with the reference year set by the Kyoto Protocol.
  • The share of auctioning revenues that Member States are recommended to use to fight and adapt to climate change mainly within the EU, but also in developing countries, is raised from 20% to 50%.
  • The text provides for a top-up to the proposed permitted level of use of JI/CDM credits in the 20% scenario for existing operators that received the lowest budgets to import and use such credits in relation to allocations and access to credits in the period 2008-2020. New sectors, new entrants in the periods 2020 and 2008-2020 will also be able to use credits. The total amount of credits that may be used will, however, not exceed 50% of the reduction between 2008 and 2020. Based on a stricter emissions reduction in the context of a satisfactory international agreement, the Commission could allow additional access to CERs and ERUs for operators in the Community scheme. See reply to question 20 below.
  • The proceeds from auctioning 300 million allowances from the new entrants reserve will be used to support up to 12 carbon capture and storage demonstration projects and projects demonstrating innovative renewable energy technologies. A number of conditions are attached to this financing mechanism. See reply to question 30 below.
  • The possibility to opt-out small combustion installations provided they are subject to equivalent measures has been extended to cover all small installations irrespective of activity, the emission threshold has been raised from 10,000 to 25,000 tonnes of CO2 per year, and the capacity threshold that combustion installations have to fulfil in addition has been raised from 25MW to 35MW. With these increased thresholds, the share of covered emissions that would potentially be excluded from the emissions trading system becomes significant, and consequently a provision has been added to allow for a corresponding reduction of the EU-wide cap on allowances.

Will there still be national allocation plans (NAPs)?

No. In their NAPs for the first (2005-2007) and the second (2008-2020) trading periods, Member States determined the total quantity of allowances to be issued – the cap – and how these would be allocated to the installations concerned. This approach has generated significant differences in allocation rules, creating an incentive for each Member State to favour its own industry, and has led to great complexity.

As from the third trading period, there will be a single EU-wide cap and allowances will be allocated on the basis of harmonised rules. National allocation plans will therefore not be needed any more.

How will the emission cap in phase 3 be determined?

The rules for calculating the EU-wide cap are as follows:

From 2020, the total number of allowances will decrease annually in a linear manner. The starting point of this line is the average total quantity of allowances (phase 2 cap) to be issued by Member States for the 2008-12 period, adjusted to reflect the broadened scope of the system from 2020 as well as any small installations that Member States have chosen to exclude. The linear factor by which the annual amount shall decrease is 1.74% in relation to the phase 2 cap.

The starting point for determining the linear factor of 1.74% is the 20% overall reduction of greenhouse gases compared to 1990, which is equivalent to a 14% reduction compared to 2005. However, a larger reduction is required of the EU ETS because it is cheaper to reduce emissions in the ETS sectors. The division that minimises overall reduction cost amounts to:

  • a 21% reduction in EU ETS sector emissions compared to 2005 by 2020;
  • a reduction of around 10% compared to 2005 for the sectors that are not covered by the EU ETS.

The 21% reduction in 2020 results in an ETS cap in 2020 of a maximum of 1720 million allowances and implies an average phase 3 cap (2020 to 2020) of some 1846 million allowances and a reduction of 11% compared to the phase 2 cap.

All absolute figures indicated correspond to the coverage at the start of the second trading period and therefore don’t take account of aviation, which will be added in 2020, and other sectors that will be added in phase 3.

The final figures for the annual emission caps in phase 3 will be determined and published by the Commission by 30 September 2020.

How will the emission cap beyond phase 3 be determined?

The linear factor of 1.74% used to determine the phase 3 cap will continue to apply beyond the end of the trading period in 2020 and will determine the cap for the fourth trading period (2021 to 2028) and beyond. It may be revised by 2025 at the latest. In fact, significant emission reductions of 60%-80% compared to 1990 will be necessary by 2050 to reach the strategic objective of limiting the global average temperature increase to not more than 2°C above pre-industrial levels.

An EU-wide cap on emission allowances will be determined for each individual year. Will this reduce flexibility for the installations concerned?

No, flexibility for installations will not be reduced at all. In any year, the allowances to be auctioned and distributed have to be issued by the competent authorities by 28 February. The last date for operators to surrender allowances is 30 April of the year following the year in which the emissions took place. So operators receive allowances for the current year before they have to surrender allowances to cover their emissions for the previous year. Allowances remain valid throughout the trading period and any surplus allowances can now be «banked» for use in subsequent trading periods. In this respect nothing will change.

The system will remain based on trading periods, but the third trading period will last eight years, from 2020 to 2020, as opposed to five years for the second phase from 2008 to 2020.

For the second trading period Member States generally decided to allocate equal total quantities of allowances for each year. The linear decrease each year from 2020 will correspond better to expected emissions trends over the period.

What are the tentative annual ETS cap figures for the period 2020 to 2020?

The tentative annual cap figures are as follows:

year Mio t CO2
2020 1.974
2020 1.937
2020 1.901
2020 1.865
2020 1.829
2020 1.792
2020 1.756
2020 1.720

These figures are based on the scope of the ETS as applicable in phase 2 (2008 to 2020), and the Commission’s decisions on the national allocation plans for phase 2, amounting to 2083 million tonnes. These figures will be adjusted for several reasons. Firstly, adjustment will be made to take into account the extensions of the scope in phase 2, provided that Member States substantiate and verify their emissions accruing from these extensions. Secondly, adjustment will be made with respect to further extensions of the scope of the ETS in the third trading period. Thirdly, any opt-out of small installations will lead to a corresponding reduction of the cap. Fourthly, the figures do not take account of the inclusion of aviation, nor of emissions from Norway, Iceland and Liechtenstein.

Will allowances still be allocated for free?

Yes. Industrial installations will receive transitional free allocation. And in those Member States that are eligible for the optional derogation, power plants may, if the Member State so decides, also receive free allowances. It is estimated that at least half of the available allowances as of 2020 will be auctioned.

While the great majority of allowances has been allocated free of charge to installations in the first and second trading periods, the Commission proposed that auctioning of allowances should become the basic principle for allocation. This is because auctioning best ensures the efficiency, transparency and simplicity of the system and creates the greatest incentive for investments in a low-carbon economy. It best complies with the “polluter pays principle” and avoids giving windfall profits to certain sectors that have passed on the notional cost of allowances to their customers despite receiving them for free.

How will allowances be handed out for free?

By 31 December 2020, the Commission will adopt EU-wide rules, which will be developed under a committee procedure (“Comitology”). These rules will fully harmonise allocations and thus all firms across the EU with the same or similar activities will be subject to the same rules. The rules will ensure as far as possible that the allocation promotes carbon-efficient technologies. The adopted rules provide that to the extent feasible, allocations are to be based on so-called benchmarks, e.g. a number of allowances per quantity of historical output. Such rules reward operators that have taken early action to reduce greenhouse gases, better reflect the polluter pays principle and give stronger incentives to reduce emissions, as allocations would no longer depend on historical emissions. All allocations are to be determined before the start of the third trading period and no ex-post adjustments will be allowed.

Which installations will receive free allocations and which will not? How will negative impacts on competitiveness be avoided?

Taking into account their ability to pass on the increased cost of emission allowances, full auctioning is the rule from 2020 onwards for electricity generators. However, Member States who fulfil certain conditions relating to their interconnectivity or their share of fossil fuels in electricity production and GDP per capita in relation to the EU-27 average, have the option to temporarily deviate from this rule with respect to existing power plants. The auctioning rate in 2020 is to be at least 30% in relation to emissions in the first period and has to increase progressively to 100% no later than 2020. If the option is applied, the Member State has to undertake to invest in improving and upgrading of the infrastructure, in clean technologies and in diversification of their energy mix and sources of supply for an amount to the extent possible equal to the market value of the free allocation.

In other sectors, allocations for free will be phased out progressively from 2020, with Member States agreeing to start at 20% auctioning in 2020, increasing to 70% auctioning in 2020 with a view to reaching 100% in 2027. However, an exception will be made for installations in sectors that are found to be exposed to a significant risk of ‘carbon leakage’. This risk could occur if the EU ETS increased production costs so much that companies decided to relocate production to areas outside the EU that are not subject to comparable emission constraints. The Commission will determine the sectors concerned by 31 December 2009. To do this, the Commission will assess inter alia whether the direct and indirect additional production costs induced by the implementation of the ETS Directive as a proportion of gross value added exceed 5% and whether the total value of its exports and imports divided by the total value of its turnover and imports exceeds 10%. If the result for either of these criteria exceeds 30%, the sector would also be considered to be exposed to a significant risk of carbon leakage. Installations in these sectors would receive 100% of their share in the annually declining total quantity of allowances for free. The share of these industries’ emissions is determined in relation to total ETS emissions in 2005 to 2007.

CO2 costs passed on in electricity prices could also expose certain installations to the risk of carbon leakage. In order to avoid such risk, Member States may grant a compensation with respect to such costs. In the absence of an international agreement on climate change, the Commission has undertaken to modify the Community guidelines on state aid for environmental protection in this respect.

Under an international agreement which ensures that competitors in other parts of the world bear a comparable cost, the risk of carbon leakage may well be negligible. Therefore, by 30 June 2020, the Commission will carry out an in-depth assessment of the situation of energy-intensive industry and the risk of carbon leakage, in the light of the outcome of the international negotiations and also taking into account any binding sectoral agreements that may have been concluded. The report will be accompanied by any proposals considered appropriate. These could potentially include maintaining or adjusting the proportion of allowances received free of charge to industrial installations that are particularly exposed to global competition or including importers of the products concerned in the ETS.

Who will organise the auctions and how will they be carried out?

Member States will be responsible for ensuring that the allowances given to them are auctioned. Each Member State has to decide whether it wants to develop its own auctioning infrastructure and platform or whether it wants to cooperate with other Member States to develop regional or EU-wide solutions. The distribution of the auctioning rights to Member States is largely based on emissions in phase 1 of the EU ETS, but a part of the rights will be redistributed from richer Member States to poorer ones to take account of the lower GDP per head and higher prospects for growth and emissions among the latter. It is still the case that 10% of the rights to auction allowances will be redistributed from Member States with high per capita income to those with low per capita income in order to strengthen the financial capacity of the latter to invest in climate friendly technologies. However, a provision has been added for another redistributive mechanism of 2% to take into account Member States which in 2005 had achieved a reduction of at least 20% in greenhouse gas emissions compared with the reference year set by the Kyoto Protocol. Nine Member States benefit from this provision.

Any auctioning must respect the rules of the internal market and must therefore be open to any potential buyer under non-discriminatory conditions. By 30 June 2020, the Commission will adopt a Regulation (through the comitology procedure) that will provide the appropriate rules and conditions for ensuring efficient, coordinated auctions without disturbing the allowance market.

How many allowances will each Member State auction and how is this amount determined?

All allowances which are not allocated free of charge will be auctioned. A total of 88% of allowances to be auctioned by each Member State is distributed on the basis of the Member State’s share of historic emissions under the EU ETS. For purposes of solidarity and growth, 12% of the total quantity is distributed in a way that takes into account GDP per capita and the achievements under the Kyoto-Protocol.

Which sectors and gases are covered as of 2020?

The ETS covers installations performing specified activities. Since the start it has covered, above certain capacity thresholds, power stations and other combustion plants, oil refineries, coke ovens, iron and steel plants and factories making cement, glass, lime, bricks, ceramics, pulp, paper and board. As for greenhouse gases, it currently only covers carbon dioxide emissions, with the exception of the Netherlands, which has opted in emissions from nitrous oxide.

As from 2020, the scope of the ETS will be extended to also include other sectors and greenhouse gases. CO2 emissions from petrochemicals, ammonia and aluminium will be included, as will N2O emissions from the production of nitric, adipic and glyocalic acid production and perfluorocarbons from the aluminium sector. The capture, transport and geological storage of all greenhouse gas emissions will also be covered. These sectors will receive allowances free of charge according to EU-wide rules, in the same way as other industrial sectors already covered.

As of 2020, aviation will also be included in the EU ETS.

Will small installations be excluded from the scope?

A large number of installations emitting relatively low amounts of CO2 are currently covered by the ETS and concerns have been raised over the cost-effectiveness of their inclusion. As from 2020, Member States will be allowed to remove these installations from the ETS under certain conditions. The installations concerned are those whose reported emissions were lower than 25 000 tonnes of CO2 equivalent in each of the 3 years preceding the year of application. For combustion installations, an additional capacity threshold of 35MW applies. In addition Member States are given the possibility to exclude installations operated by hospitals. The installations may be excluded from the ETS only if they will be covered by measures that will achieve an equivalent contribution to emission reductions.

How many emission credits from third countries will be allowed?

For the second trading period, Member States allowed their operators to use significant quantities of credits generated by emission-saving projects undertaken in third countries to cover part of their emissions in the same way as they use ETS allowances. The revised Directive extends the rights to use these credits for the third trading period and allows a limited additional quantity to be used in such a way that the overall use of credits is limited to 50% of the EU-wide reductions over the period 2008-2020. For existing installations, and excluding new sectors within the scope, this will represent a total level of access of approximately 1.6 billion credits over the period 2008-2020. In practice, this means that existing operators will be able to use credits up to a minimum of 11% of their allocation during the period 2008-2020, while a top-up is foreseen for operators with the lowest sum of free allocation and allowed use of credits in the 2008-2020 period. New sectors and new entrants in the third trading period will have a guaranteed minimum access of 4.5% of their verified emissions during the period 2020. For the aviation sector, the minimum access will be 1.5%. The precise percentages will be determined through comitology.

These projects must be officially recognised under the Kyoto Protocol’s Joint Implementation (JI) mechanism (covering projects carried out in countries with an emissions reduction target under the Protocol) or Clean Development Mechanism (CDM) (for projects undertaken in developing countries). Credits from JI projects are known as Emission Reduction Units (ERUs) while those from CDM projects are called Certified Emission Reductions (CERs).

On the quality side only credits from project types eligible for use in the EU trading scheme during the period 2008-2020 will be accepted in the period 2020. Furthermore, from 1 January 2020 measures may be applied to restrict the use of specific credits from project types. Such a quality control mechanism is needed to assure the environmental and economic integrity of future project types.

To create greater flexibility, and in the absence of an international agreement being concluded by 31 December 2009, credits could be used in accordance with agreements concluded with third countries. The use of these credits should however not increase the overall number beyond 50% of the required reductions. Such agreements would not be required for new projects that started from 2020 onwards in Least Developed Countries.

Based on a stricter emissions reduction in the context of a satisfactory international agreement, additional access to credits could be allowed, as well as the use of additional types of project credits or other mechanisms created under the international agreement. However, once an international agreement has been reached, from January 2020 onwards only credits from projects in third countries that have ratified the agreement or from additional types of project approved by the Commission will be eligible for use in the Community scheme.

Will it be possible to use credits from carbon ‘sinks’ like forests?

No. Before making its proposal, the Commission analysed the possibility of allowing credits from certain types of land use, land-use change and forestry (‘LULUCF’) projects which absorb carbon from the atmosphere. It concluded that doing so could undermine the environmental integrity of the EU ETS, for the following reasons:

  • LULUCF projects cannot physically deliver permanent emissions reductions. Insufficient solutions have been developed to deal with the uncertainties, non-permanence of carbon storage and potential emissions ‘leakage’ problems arising from such projects. The temporary and reversible nature of such activities would pose considerable risks in a company-based trading system and impose great liability risks on Member States.
  • The inclusion of LULUCF projects in the ETS would require a quality of monitoring and reporting comparable to the monitoring and reporting of emissions from installations currently covered by the system. This is not available at present and is likely to incur costs which would substantially reduce the attractiveness of including such projects.
  • The simplicity, transparency and predictability of the ETS would be considerably reduced. Moreover, the sheer quantity of potential credits entering the system could undermine the functioning of the carbon market unless their role were limited, in which case their potential benefits would become marginal.

The Commission, the Council and the European Parliament believe that global deforestation can be better addressed through other instruments. For example, using part of the proceeds from auctioning allowances in the EU ETS could generate additional means to invest in LULUCF activities both inside and outside the EU, and may provide a model for future expansion. In this respect the Commission has proposed to set up the Global Forest Carbon Mechanism that would be a performance-based system for financing reductions in deforestation levels in developing countries.

Besides those already mentioned, are there other credits that could be used in the revised ETS?

Yes. Projects in EU Member States which reduce greenhouse gas emissions not covered by the ETS could issue credits. These Community projects would need to be managed according to common EU provisions set up by the Commission in order to be tradable throughout the system. Such provisions would be adopted only for projects that cannot be realised through inclusion in the ETS. The provisions will seek to ensure that credits from Community projects do not result in double-counting of emission reductions nor impede other policy measures to reduce emissions not covered by the ETS, and that they are based on simple, easily administered rules.

Are there measures in place to ensure that the price of allowances won’t fall sharply during the third trading period?

A stable and predictable regulatory framework is vital for market stability. The revised Directive makes the regulatory framework as predictable as possible in order to boost stability and rule out policy-induced volatility. Important elements in this respect are the determination of the cap on emissions in the Directive well in advance of the start of the trading period, a linear reduction factor for the cap on emissions which continues to apply also beyond 2020 and the extension of the trading period from 5 to 8 years. The sharp fall in the allowance price during the first trading period was due to over-allocation of allowances which could not be “banked” for use in the second trading period. For the second and subsequent trading periods, Member States are obliged to allow the banking of allowances from one period to the next and therefore the end of one trading period is not expected to have any impact on the price.

A new provision will apply as of 2020 in case of excessive price fluctuations in the allowance market. If, for more than six consecutive months, the allowance price is more than three times the average price of allowances during the two preceding years on the European market, the Commission will convene a meeting with Member States. If it is found that the price evolution does not correspond to market fundamentals, the Commission may either allow Member States to bring forward the auctioning of a part of the quantity to be auctioned, or allow them to auction up to 25% of the remaining allowances in the new entrant reserve.

The price of allowances is determined by supply and demand and reflects fundamental factors like economic growth, fuel prices, rainfall and wind (availability of renewable energy) and temperature (demand for heating and cooling) etc. A degree of uncertainty is inevitable for such factors. The markets, however, allow participants to hedge the risks that may result from changes in allowances prices.

Are there any provisions for linking the EU ETS to other emissions trading systems?

Yes. One of the key means to reduce emissions more cost-effectively is to enhance and further develop the global carbon market. The Commission sees the EU ETS as an important building block for the development of a global network of emission trading systems. Linking other national or regional cap-and-trade emissions trading systems to the EU ETS can create a bigger market, potentially lowering the aggregate cost of reducing greenhouse gas emissions. The increased liquidity and reduced price volatility that this would entail would improve the functioning of markets for emission allowances. This may lead to a global network of trading systems in which participants, including legal entities, can buy emission allowances to fulfil their respective reduction commitments.

The EU is keen to work with the new US Administration to build a transatlantic and indeed global carbon market to act as the motor of a concerted international push to combat climate change.

While the original Directive allows for linking the EU ETS with other industrialised countries that have ratified the Kyoto Protocol, the new rules allow for linking with any country or administrative entity (such as a state or group of states under a federal system) which has established a compatible mandatory cap-and-trade system whose design elements would not undermine the environmental integrity of the EU ETS. Where such systems cap absolute emissions, there would be mutual recognition of allowances issued by them and the EU ETS.

What is a Community registry and how does it work?

Registries are standardised electronic databases ensuring the accurate accounting of the issuance, holding, transfer and cancellation of emission allowances. As a signatory to the Kyoto Protocol in its own right, the Community is also obliged to maintain a registry. This is the Community Registry, which is distinct from the registries of Member States. Allowances issued from 1 January 2020 onwards will be held in the Community registry instead of in national registries.

Will there be any changes to monitoring, reporting and verification requirements?

The Commission will adopt a new Regulation (through the comitology procedure) by 31 December 2020 governing the monitoring and reporting of emissions from the activities listed in Annex I of the Directive. A separate Regulation on the verification of emission reports and the accreditation of verifiers should specify conditions for accreditation, mutual recognition and cancellation of accreditation for verifiers, and for supervision and peer review as appropriate.

What provision will be made for new entrants into the market?

Five percent of the total quantity of allowances will be put into a reserve for new installations or airlines that enter the system after 2020 (“new entrants”). The allocations from this reserve should mirror the allocations to corresponding existing installations.

A part of the new entrant reserve, amounting to 300 million allowances, will be made available to support the investments in up to 12 demonstration projects using the carbon capture and storage technology and demonstration projects using innovative renewable energy technologies. There should be a fair geographical distribution of the projects.

In principle, any allowances remaining in the reserve shall be distributed to Member States for auctioning. The distribution key shall take into account the level to which installations in Member States have benefited from this reserve.

What has been agreed with respect to the financing of the 12 carbon capture and storage demonstration projects requested by a previous European Council?

The European Parliament’s Environment Committee tabled an amendment to the EU ETS Directive requiring allowances in the new entrant reserve to be set aside in order to co-finance up to 12 demonstration projects as requested by the European Council in spring 2007. This amendment has later been extended to include also innovative renewable energy technologies that are not commercially viable yet. Projects shall be selected on the basis of objective and transparent criteria that include requirements for knowledge sharing. Support shall be given from the proceeds of these allowances via Member States and shall be complementary to substantial co-financing by the operator of the installation. No project shall receive support via this mechanism that exceeds 15% of the total number of allowances (i.e. 45 million allowances) available for this purpose. The Member State may choose to co-finance the project as well, but will in any case transfer the market value of the attributed allowances to the operator, who will not receive any allowances.

A total of 300 million allowances will therefore be set aside until 2020 for this purpose.

What is the role of an international agreement and its potential impact on EU ETS?

When an international agreement is reached, the Commission shall submit a report to the European Parliament and the Council assessing the nature of the measures agreed upon in the international agreement and their implications, in particular with respect to the risk of carbon leakage. On the basis of this report, the Commission shall then adopt a legislative proposal amending the present Directive as appropriate.

For the effects on the use of credits from Joint Implementation and Clean Development Mechanism projects, please see the reply to question 20.

What are the next steps?

Member States have to bring into force the legal instruments necessary to comply with certain provisions of the revised Directive by 31 December 2009. This concerns the collection of duly substantiated and verified emissions data from installations that will only be covered by the EU ETS as from 2020, and the national lists of installations and the allocation to each one. For the remaining provisions, the national laws, regulations and administrative provisions only have to be ready by 31 December 2020.

The Commission has already started the work on implementation. For example, the collection and analysis of data for use in relation to carbon leakage is ongoing (list of sectors due end 2009). Work is also ongoing to prepare the Regulation on timing, administration and other aspects of auctioning (due by June 2020), the harmonised allocation rules (due end 2020) and the two Regulations on monitoring and reporting of emissions and verification of emissions and accreditation of verifiers (due end 2020).

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