© Hollandse Hoogte / Peter Hilz

CO2 emissions trading system

In order to reduce greenhouse gas emissions in a cost effective manner, the European Union launched an emissions trading scheme in 2005. The price for CO2 emissions was high, 30 euros per tonne in 2008, but has fluctuated between 3 and 9 euros per tonne since 2012.

Price of CO2 emission allowances (euros per tonne; futures contracts; yearly averages; deflated to 2015 price level)
 CO2price
2007 Jan17.3
2007 Feb15.5
2007 Mar17.3
2007 Apr19.2
2007 May23.6
2007 Jun25.2
2007 Jul22.7
2007 Aug21.8
2007 Sep23.4
2007 Oct24.7
2007 Nov25
2007 Dec24.7
2008 Jan24.1
2008 Feb22.5
2008 Mar23.6
2008 Apr26.5
2008 May27.6
2008 Jun29.7
2008 Jul28.1
2008 Aug25.6
2008 Sep26
2008 Oct22.7
2008 Nov18.7
2008 Dec16.6
2009 Jan14
2009 Feb10.2
2009 Mar12
2009 Apr14.3
2009 May16
2009 Jun14.5
2009 Jul14.7
2009 Aug15.7
2009 Sep15.2
2009 Oct15.1
2009 Nov14.5
2009 Dec14.3
2010 Jan14
2010 Feb13.9
2010 Mar13.8
2010 Apr15.2
2010 May16.4
2010 Jun16.5
2010 Jul15.3
2010 Aug15.8
2010 Sep16.5
2010 Oct16.4
2010 Nov15.8
2010 Dec15.1
2011 Jan14.6
2011 Feb15.1
2011 Mar16.5
2011 Apr16.9
2011 May16.8
2011 Jun15.5
2011 Jul12.9
2011 Aug12.6
2011 Sep12.1
2011 Oct10.6
2011 Nov9.5
2011 Dec7.5
2012 Jan7
2012 Feb8.4
2012 Mar7.5
2012 Apr6.8
2012 May6.6
2012 Jun7.1
2012 Jul7.5
2012 Aug7.6
2012 Sep7.8
2012 Oct7.9
2012 Nov7.5
2012 Dec6.6
2013 Jan5.2
2013 Feb4.6
2013 Mar4.1
2013 Apr3.8
2013 May3.5
2013 Jun4.2
2013 Jul4.2
2013 Aug4.4
2013 Sep5.2
2013 Oct4.9
2013 Nov4.5
2013 Dec4.8
2014 Jan5
2014 Feb6.4
2014 Mar5.9
2014 Apr5.2
2014 May5
2014 Jun5.6
2014 Jul5.9
2014 Aug6.2
2014 Sep6
2014 Oct6.1
2014 Nov6.9
2014 Dec6.9
2015 Jan7
2015 Feb7.3
2015 Mar6.8
2015 Apr7
2015 May7.4
2015 Jun7.4
2015 Jul7.7
2015 Aug8.1
2015 Sep8.1
2015 Oct8.3
2015 Nov8.5
2015 Dec8.3
2016 Jan6.8
2016 Feb5.2
2016 Mar4.9
2016 Apr5.7
2016 May5.9
2016 Jun5.6
2016 Jul4.6
2016 Aug4.7
2016 Sep4.3
2016 Oct5.7
2016 Nov5.6
2016 Dec5.1
2017 Jan5.2
2017 Feb5.1
2017 Mar5
2017 Apr4.6
2017 May4.6
2017 Jun4.8
2017 Jul5.2
2017 Aug5.5
2017 Sep6.6
2017 Oct7.1
2017 Nov7.4
2017 Dec7.3
Source: PBL/NEV

The issue

All major greenhouse gas emitters in the EU are obliged to participate in the emissions trading system (ETS). With this system, approximately 40 percent of EU greenhouse gas emissions are regulated. The European Union's goal is for ETS emissions to be at least 21 percent lower in 2020 than in 2005. No target is set for the CO2 price, which is determined by the market.
Every participating company in the emissions trading system must surrender as many emission allowances as it emits greenhouse gases annually. A proportion of emission allowances are allocated to companies free of charge. If a company holds allowances in surplus, it can trade these. If a company has a shortfall, it can either buy additional emission rights or reduce emissions by means of targeted investments. The higher the CO2 price, the more interesting the latter option will be.

Analysis

Halfway through 2008, the CO2 price peaked at 30 euros per tonne and then quickly dropped to 10 euros per tonne. After that, the CO2 price fluctuated around 15 euros per tonne. Another downward trend was seen in 2011. Two years later, the CO2 price had dropped to 4 euros per tonne. The price then rose gradually to 8 euros per tonne and in 2016 dropped back to 5 euros per tonne. Since the summer of 2017, the price has risen to 7 euros per tonne. On the basis of CO2 price alone, it was more attractive to invest in lower emissions during the period 2007-2011 than it has been over the past six years.

International comparison

In 2016, greenhouse gas emissions from ETS companies in EU member states were down by 27 percent compared to 2005. This means that the EU target of 21 percent reduction in 2020 has already been achieved. The Netherlands has hardly contributed to this. Germany and Poland also lag behind. On the other hand, United Kingdom, Spain, Italy and France have made their contribution by jointly achieving 40 percent lower ETS emissions in 2016 than in 2005.

CO2 emissions by companies in Emissions Trading System (% mutation 2016 to 2005)
 Change in CO2 emissions
Luxembourg-48.5
United Kingdom-46.4
Spain-38.3
Italy-37.4
Greece-37.2
Denmark-35
Belgium-34.4
Hungary-34.3
France-34.1
Portugal-33
Slovakia-26.8
Slovenia-26
Finland-23.5
Ireland-22.2
Czech Republic-21.6
Austria-19.6
Sweden-17.2
Germany-12.7
Poland-10.5
Norway-6.1
Netherlands-4.3
Iceland0.8
Estonia4.5
Source: European Environment Agency