How the ETS Works

May 17, 2008
Regulations and Government

According to the European Union’s CO2 emission trading scheme (ETS), each affected facility is allotted a certain number of CO2 emission permits, based on its past emissions. For example, if a facility emitted an average of 100,000 tons per year during a given period, it will be allotted (on a free basis) 90,000 tons per year for the next four years.

Companies can choose to invest in emission-cutting procedures or technologies, or buy additional CO2 permits on the market, or a combination of both.Aviation companies may find it more attractive to buy CO2 permits from other industries. In effect, this would mean that they would be funding these industries’ investments in emission-reducing technology.

With one metric ton of CO2 trading at about €25 ($38), the cost for an airline to be included in the ETS is expected to be a few euros per passenger.

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