The EU Emissions Trading System (EU ETS)

Confused about EU ETS? Let us help take the strain…

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.

The EU ETS works on a ‘cap and trade’ basis, so there is a ‘cap’ or limit set on the total greenhouse gas emissions allowed by all participants covered by the System and this cap is converted into tradable emission allowances.

Tradable emission allowances are allocated to participants in the market; in the EU ETS this is done via a mixture of free allocation and auctions. One allowance gives the holder the right to emit one tonne of CO2 (or its equivalent). Participants covered by the EU ETS must monitor and report their emissions each year and surrender enough emission allowances to cover their annual emissions.

Participants who are likely to emit more than their allocation have a choice between taking measures to reduce their emissions or buying additional allowances; either from the secondary market – e.g. companies who hold allowances they do not need – or from Member State held auctions. More information is available on the EU ETS: carbon markets webpage.

CMR can provide support and advice in helping you to reduce emissions in line with, or exceeding, your internal targets and also analysis, measurement, reporting and verification of your carbon emissions.

For more information, contact us at, or call on +44 (0)844 225 1166 to speak to one of our senior energy and water consultants.