About emissions trading

The term Emissions Trading is usually referring to the EU Emissions Trading System (EU ETS). But emissions trading also occurs in other places. This page describes how emissions trading works and is structured.
 

The EU's emission trading system is largely linked to and based on the trading of emission units in and between parties under the Kyoto Protocol. Today there are also trading systems in e.g. China, New Zealand and South Korea.

At European level, several initiatives are being launched to develop emissions trading so that more countries, social sectors and  greenhouse gases are included. The current work aims to introduce changes in the fourth phase of the EU emissions trading system, 2021 - 2030. In parallel, preparations are underway to connect Switzerland's national system to the EU emissions trading system. 

 

Emissions trading in the EU

Emissions trading is based on a ceiling for total emissions. Each year, emissions from the emission facilities that are part of the EU's emissions trading system must be compensated by the corresponding number of emission allowances. The basis for allocating allowances to companies is auctioning, but a large part of the allowances is also allocated free of charge.

Capacity for trade is created when business operators have a deficit or surplus of emission rights that can be sold and purchased in the market. It is not only business operators who can buy and sell emission rights

In Sweden, approximately 740 Swedish plants in industrial and energy production and 20 aircraft operators are covered under the requirement to report emissions and transfer emission allowances. In total, approximately 13,000 plants are affected in Europe across 31 countries, accounting for approximately 45% of total greenhouse gas emissions within the Union.

Emissions trading in the EU

The Union Registry

All emission rights transfers in the EU trading system and other trading units under the Kyoto Protocol shall be registered in a separate register, the so-called. Union registry. The Swedish part of the Union Register is administered by the Swedish Energy Agency and is used, among other things, to compile statistics each year on the companies' annual emissions and how the emissions were compensated with emission units.

Individuals and organizations can also trade with emission allowances or units from the Kyoto Protocol's emissions trading. You can buy the units directly from a company or through any of the many brokers, stock exchanges or other brokers that are established in the market. To be able to trade directly within the EU trading system, you must have an account in the Union Registry, in Sweden or in any other Member State.

The union registry

Responsibilities in the EU ETS

Several authorities are involved in the implementation of the EU Trade Directive. In Sweden, the main responsibility for implementation is divided between the Swedish Energy Agency and the Swedish Environmental Protection Agency. From 2018, the Swedish Environmental Protection Agency also have role as a permit authority after the County Administrative Board.

Responsibilities in the EU ETS