Greenhouse gas emissions from businesses participating in the European Union's Emissions Trading System (EU ETS) fell 3.1 percent in 2008 compared with 2007, according to the EU Commission. Last year marks the beginning of the second trading period, which runs from 2008 to 2012.
Stavros Dimas, environment commissioner attributes the 3 percent reduction to businesses taking measures to cut their emissions based on a strong carbon price before the economic downturn started. He stated that the reduction "confirms that the EU has a well-functioning trading system, with a robust cap, clear price signal and liquid market." He expects these results to encourage other countries in their efforts to set up comparable cap-and-trade systems.
The scheme failed to have an impact on emissions in its first trading phase from 2005 to 2007 after the EU handed out too many emissions permits, causing a carbon price crash, reports Reuters.
Prices for carbon permits, called EU Allowances (EUAs), hit a high of 31 euros ($42.02) last July, before dropping to as low as 8 euros in February, according to Reuters.
The effectiveness of a cap-and-trade program will depend on the cost of allowances, says Cambridge Energy Research Associate.
Carbon emissions data, based on information provided by Member State registries, shows that the EU ETS in 2008 totaled 2.060 billion tons of CO2 equivalent, excluding Bulgaria, Norway and Liechtenstein, compared with 2.125 billion tons in 2007.
However, the data doesn't reflect some slight changes including the addition of emissions of nitrous oxide from the production of nitric acid in the Netherlands and Norway, and fewer companies participating in the system.
The data also shows that participating companies surrendered 81.7 metric tons of emission credits, CERs and ERUs, generated through the Kyoto Protocol to offset part of their emissions.
CERs accounted for 3.9 percent of all surrenders. Forty-one percent of these originated in China, 31 percent in India, 15 percent in South Korea and 7 percent in Brazil, with an additional 14 countries of origin accounting for the remaining 5 percent. ERUs accounted for only 0.002 percent of all surrenders.
The combined CER and ERU surrenders in 2008 used up roughly 6 percent of the approximately 1.4 billion credits that are allowed over the 2008-2012 trading period, according to the Commission.
