Table of Contents

  • With this report The Nordic Council of Ministers would like to contribute to the ongoing discussions on how the EU ETS ought to develop in the future. While several models for how an improved system better can meet its goals have been proposed, this report focuses on how the current scope of emissions within the system can be extended. This would mean including even more sectors to those already in the system. More specifically the report looks at the road transport sector, and analyses the opportunities for, and barriers to, its inclusion in the EU ETS.

  • The purpose of the EU ETS from its commencement in 2005 was to enable the EU to meet its emission reduction targets in a cost efficient manner. The aim was to prepare the EU for international emissions trading in 2008 by learning-by-doing, creating a trading market with sufficient liquidity, and with a strong foundation of monitoring, reporting and verification procedures.

  • The EU ETS commenced in 2005 and its purpose has been to allow for the EU to meet its international emission reduction targets in a cost efficient way (EC, 2003). The Commission opted for a learning-by-doing approach to prepare the Community for the start of international emissions trading under the Kyoto Protocol in 2008 (CEC, 2000, p. 10). To start with, the aim was to create the critical mass for a liquid trading market and establish the necessary monitoring, reporting and verification infrastructure. For this reason, the EU ETS Directive focused, like all successful applications of cap-and-trade systems in various environmental domains have done, mainly on large stationary sources and only on CO2 emitters, while in principle the EU ETS Directive covers all greenhouse gases, see Annex II of the Directive (CEC, 2008, p. 32). The limited scope covering power generation and energy-intensive industrial sectors meant starting off with a small number of economic sectors but with significant emissions for which monitoring and verification of emissions was feasible. The intention was, however, for the system to be open for gradual geographical, sectoral and gas coverage extension (CEC, 2000, p. 10).

  • This section explores the possibilities for expanding the Nordic coverage of the EU ETS in the existing regulative framework, which is a combination of EU and national regulation. Subsection 2.1 discusses the EU perspective, specifically the process of expanding the EU ETS, the Effort Sharing Decision (ESD) and the EU-wide policies targeted at the non-ETS sectors. Subsection 2.2 discusses the Nordic perspective, specifically the national circumstances relevant for GHG emissions and their regulation, and the mix of instruments currently used to regulate the non-ETS sectors. Subsection 2.3 discusses barriers to inclusions of four major sectors currently outside the EU ETS: transport, heating, agriculture and fisheries, and the waste sector.

  • This section explores the barriers and the solutions for including road transport in the EU ETS. Subsection 3.1 summarises the community level discussion and rational why road transport has not already been included in the EU ETS. Subsection 3.2 presents the taxes that road vehicles are subject to in each Nordic country. Subsection 3.3 discusses the main barriers to inclusion. Subsection 3.4 concludes and discusses the relevance of the barriers identified in Subsection 3.3 for other non-ETS sectors.