The EU Emission Trading Scheme: sectoral allocation and factors determining emission changes

The European Union (EU) Emission Trading Scheme that covers 50% of EU greenhouse gas emissions is the biggest cap-and-trade scheme worldwide. In this article, for three emission-intensive sectors ('power and heat', 'cement and lime' and 'pulp and paper') allocation caps, emission developments and the main emission drivers are analysed. In order to assess what drives emissions and whether emission-saving actions were taken since 2005, a decomposition approach is applied. The analysis reveals pronounced sectoral disparities indicating some emission-reducing activities since 2005; for 'electricity and heat' and 'pulp and paper', these, however, do not deviate from the long-term trend prior to the introduction of the scheme. The occurrence of low CO2 prices emphasises the need for adaptation towards a more effective system.