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 ETS was from the start largely linked to and based on the trading of emission units in and between parties under the Kyoto Protocol. Today there are also other trading systems, such as in California, China, New Zealand and South Korea.

At European level, several steps have been taken to develop emissions trading so that more countries, sectors of society and greenhouse gases are covered.

The results have led to several major changes in the fourth phase of the EU ETS. A phase that extends between the years 2021 and 2030. From 2021, Switzerland's national system is connected to EU ETS.

Emissions trading is based on a cap for total emissions. Each year, emissions from the emission facilities that are part of the EU emissions trading system must be compensated by the corresponding number of emission allowances. The basis for allocating allowances to the participating entities 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 the participating 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 by the requirement to report emissions and transfer emission allowances. In total, approximately 15,000 plants and 1500 aircraft operators across 31 countries in Europe are covered by the EU ETS, accounting for approximately 45% of total greenhouse gas emissions within the Union.

Emissions trading in the EU

All emissions trading in the EU ETS and emissions trading under the Kyoto protocol shall be registered in the so-called Union Registry. The Swedish part of the Union Registry is administered by the Swedish Energy Agency and is used, among other things, to verify emissions and surrender emission allowances on a yearly basis.

Individuals and organisations can also trade with emission allowances or units from the Kyoto Protocol's emissions trading. You can purchase units directly from a company or through any of the many brokers, stock exchanges or other dealers 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

Several government agencies 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 act as the emissions permit authority, a role moved from the County Administrative Boards.

Responsibilities in the EU ETS