Safety Security & Sustainability

   Emission trading schemes




Zoi Nikopoulou

The Kyoto Protocol introduced the concept of emissions control to a global audience. Under this agreement, in 2005 the EU established a European Trading Scheme (ETS) for trading carbon dioxide (CO2).

But ‘cap-and-trade’ programs were already in operation in the US, where nitrogen oxides (NOx) and sulphur oxides (SOx) had been traded since 1994. In fact, in Los Angeles ships can also participate in the local scheme, exchanging credits with land installations of the coastal zone. US EPA proclaims the success of emission trading schemes

Emissions trading schemes such as ETS or the US equivalent naturally have critics and supporters. Each program operates under a different frame, according to the ambition level, the environmental effects of the gasses and other parameters of fermentation. 

The European Union’s Emission Trading Scheme (EU ETS) currently covers most large industrial installations, and as of recently aviation.  
The  other transport sectors including maritime may also come into  consideration when expanding the EU ETS after 2012. There are many options for how emissions trading could be applied to the transport sector(s). Such a scheme could cover all transport sectors or separate schemes for sub sectors such as road or maritime transport.

The scheme could be ‘open’ i.e. linked to the EU ETS and other trading systems, or ‘closed’ i.e. restricted to the sector itself. Then there are a wide number of other design options and criteria to consider. Maritime transport is being accounted for the first time for its emissions – mainly NOx and SOx- while regulation and policy are being formed.

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   Glossary Terms


Acidification is the build-up of excess acids into soils, waters, and air.
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Allowance (or permit)
Permission to emit one credit of the gas within a specified time 5. Cap: the maximum allowable emissions over a regulated area and within a specified time, often tautological with the regulated (capped) area.
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Banking (emission trading)
The possibility to carry over unsold emission reduction credits from one period to another.
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Cap (emission trading)
The maximum allowable emissions over a regulated area and within a specified time, often tautological with the regulated (capped) area.
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Carbon credit
A generic term to assign a value to a reduction or offset of greenhouse gas emissions. A carbon credit is usually equivalent to one tonne of carbon dioxide equivalent (CO2-e). A carbon credit can be used by a business or individual to reduce their carbon footprint by investing in an activity that has reduced or sequestered greenhouse gases at another site.
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Carbon dioxide (CO2)
The most abundant of the greenhouse gases, produced as a by-product of oil and gas production, burning fossil fuels and biomass. All animals, plants, fungi and microorganisms also produce CO2. It has a global warming potential of 1.
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Emission reduction credit
A tradable emission unit deriving from reducing further than the requirement
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European Union Greenhouse Gas Emission Trading Scheme
In January 2005 the European Union Greenhouse Gas Emission Trading Scheme (EU ETS) commenced operation as the largest multi-country, multi-sector Greenhouse Gas emission trading scheme world-wide. The scheme is based on Directive 2003/87/EC, which entered into force on 25 October 2003.
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Externality of an economic transaction is an impact on a party that is not directly involved in the transaction. In transport, externalities associated with environmental impact are becoming important in comparing different modes of transport.
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Greenhouse gases (GHG)
Gases on the earth’s atmosphere which absorb and re-emit infrared radiation. The Kyoto Protocol lists six major greenhouse gases, which vary in their relative warming effect. The six gases are: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), HFCs (hydrofluorocarbons), PFCs (perfluorocarbons) and sulphur hexafluoride (SF6).
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Hot air
Excessive allowances often due to loss of industrial output or de-industrialization.
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Hot spot
Localised high emissions due to trading and/or due to a geographical swift to where emissions are physically reduced.
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Kyoto Protocol
The Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change. The major feature of the Kyoto Protocol is that it sets binding targets for 37 industrialized countries and the European community for reducing greenhouse gas (GHG) emissions .These amount to an average of five per cent against 1990 levels over the five-year period 2008-2012.
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Emissions of nitrogen oxides are produced during combustion. They contribute to a number of problems such as, human health eutrophication and ground level ozone.
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Oxygen compounds of sulphur. The family of sulphur oxides emissions, mainly consisting of SO2, is produced during combustion due to content of sulphur in the fuel.
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  Additional Information for Emission trading schemes
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   Subject News
  23/09/2009 - Shipping bodies back cap and trade scheme to cut emissions
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   Linked Topics
  EU Transport policy and its instruments
Emission trading schemes

Regulatory Framework
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   Information Sources
  SIKA - Swedish Institute for Transport and Communications Analysis
Swedish Environmental Protection Agency
MIT CEEPR - Massachusetts Institute of Technology Center for Energy and Environmental Policy Research
Pew Center on Climate Change
Alliance for Global Sustainability (AGS)
EU greenhouse gas emission allowance trading scheme
European Environment Agency
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