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Sectoral expansion of the EU ETS

A Nordic perspective on barriers and solutions to include new sectors in the EU ETS with special focus on road transport

image of Sectoral expansion of the EU ETS

The European Emissions trading Scheme (EU ETS) was launched in 2005. The scheme started off with a limited scope, but has gradually expanded, in terms of geographical, sectoral and gas coverage. This report analyses the possibilities for further sectoral expansion in the Nordic countries. The analysis is done in terms of barriers and solutions for inclusion of four major sectors currently outside the scope of the scheme: transport, heating, agriculture and fisheries, and waste. Focus is on the road transport sector, which is a major source of greenhouse gas emissions in the Nordic countries. The main barriers identified for inclusion of road transport are related to the overlap with existing policy instruments, high administrative costs of downstream inclusion, and potential loss of fiscal revenue. Experiences from other trading schemes show that the barriers can be overcome.

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Executive summary

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.

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