How does the EU's Emission Trading Scheme work?
The EU Emission Trading Scheme (ETS) is a program designed to reduce greenhouse gas emissions in the European Union (EU) by placing a limit on emissions. The ETS works by setting a cap on the amount of emissions that a particular industry or sector can generate each year. Companies then have to purchase permits that allow them to emit a certain amount of carbon dioxide. Companies must either purchase the permits from the EU or through their own carbon emissions reduction program. Under the ETS, the EU produces carbon emission credits that companies can use instead of purchasing new credits. Each credit represents one tonne of carbon dioxide savings. Companies can use these credits to offset their emissions, but cannot exceed their allocated limit. The ETS also encourages companies to invest in environmentally-friendly technologies and practices. Companies can purchase additional credits, or engage in activities that increase efficiency, reduce emissions, or increase the use of renewable energy. The ETS also includes a system to monitor and report carbon emission levels. Companies must report their emissions each year, and any companies that exceed their limit face penalties. Overall, the EU ETS is a program designed to reduce emissions and promotes the development of clean energy sources. The ETS also encourages businesses to invest in green technologies and aids in the global effort to combat climate change.
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