Emissions trading

The aim of the EU Emissions Trading System (EU ETS) is to keep the greenhouse gas emissions of industrial and energy production plants and flights within the European Economic Area (EEA) below the EU-wide emissions cap for the emissions trading sector.

The ETS covers more than 40% of the total greenhouse gas emissions in the EU and just under half of the greenhouse gas emissions in Finland.

The principles of emissions trading are:

  • Greenhouse gas emissions are reduced where reductions are the cheapest to achieve.
  • If it is cheaper for companies to obtain emission allowances on the market than to implement emission reduction measures, it is more economical for them to purchase emission allowances than to cut their own emissions.
  • In reverse, emission reduction measures that are cheaper than emission allowances are worth implementing. 

Inclusion in the Emissions Trading System

The EU ETS applies to large industrial installations and installations with a total rated thermal input exceeding 20 megawatts and to flights within the European Economic Area (EEA). In Finland, the ETS also applies to district heating plants of 20 megawatts or less. 

Emissions trading is conducted with emission allowances

Operators can buy and sell allowances freely throughout the EU-wide market. There are several trading platforms for emission allowances in the EU ETS. Allowances are also traded outside trading platforms. The price of emission allowances is determined in the market based on supply and demand. The holding and transfer of emission allowances is handled in the Member States’ shared system, the Union Registry.
Emission allowances are allocated partly through auctions and partly by allocating them for free directly to operators based on harmonised free allocation rules. The Energy Authority is competent national authority with respect to free allocation and the Union Registry.

The Ministry of Economic Affairs and Employment is responsible for legislative affairs.

Further information: juhani.tirkkonen(at)gov.fi, eleonoora.eilitta(at)gov.fi, valtteri.harmala(at)gov.fi