The purpose of the system is simple but powerful: to put a price on carbon emissions in order to create financial incentives for companies to switch to fossil-free technology. By making it expensive to pollute and profitable to invest in sustainability, green development is driven forward.

How the Cap and Trade system works within the EU ETS

The EU ETS is what is sometimes referred to as the regulated market for the purchase of emission allowances and is based on a principle known as cap and trade. This means that there is an upper limit on the total amount of greenhouse gases that participating businesses are allowed to emit.

1. Emissions cap: The EU sets a cap on total emissions for all participants. This cap is lowered each year to ensure that total emissions decrease over time.
2. Emissions allowances: Within the framework of the cap, emissions allowances are allocated or auctioned. An emissions allowance entitles the holder to emit one ton of carbon dioxide (or an equivalent amount of other greenhouse gases).
3. Trading (The Trade): Companies that manage to reduce their emissions faster than expected can sell their surplus emission allowances to companies that are finding it more difficult to make the transition. This creates a market where the price is determined by supply and demand.

Who is covered by the EU ETS emissions trading scheme?

The system currently covers around 40% of total EU emissions and focuses mainly on energy-intensive sectors:

• Power and heat production.
• Energy-intensive industries (e.g., steel, cement, chemicals, and paper).
• Air traffic within the EEA area, which includes the EU, Norway, Iceland, and Liechtenstein.
• Maritime transport (recently included in the system).

Why is the price of emission allowances important?

In recent years, the price of emission allowances has risen significantly. A higher price means that it becomes more economically viable for companies to invest in more expensive but cleaner technologies, such as hydrogen power or electrification, rather than continuing to pay for their emissions.

ZeroMission's role in the regulated emissions trading market

Even companies that are not covered by the regulated market for purchasing emission allowances can participate in the market. ZeroMission organizations navigate this complex landscape by:

• Strategic advice: How companies can manage risks and opportunities linked to carbon pricing.
• Access to emission allowances: The opportunity to purchase emission allowances as part of proactive climate action.
• carbon offsetting: In addition to the EU ETS, ZeroMission works ZeroMission certified climate projects (carbon credits) that contribute to binding, preventing, or reducing carbon dioxide emissions.

The future and CBAM

To protect the competitiveness of European industry and prevent production from moving to countries with less stringent environmental regulations (known as carbon leakage), the EU is now also introducing the CBAM (Carbon Border Adjustment Mechanism). This is a border adjustment mechanism that means that imports of certain goods (such as steel and cement) from countries outside the EU will also be subject to a carbon tax corresponding to the price in the EU ETS.

Buying emission allowances through ZeroMission

Are you interested in purchasing emission allowances withinthe EU carbon marketto support and finance the phase-out of fossil fuel emissions in a real, measurable, and verified way? Contact us to learn more about the market or make your purchase.