emissions trading system (ETS)

How it is used

Also called cap and trade. Installations must monitor, report and verify (MRV) their emissions and surrender enough allowances each year. Allowances are given out for free or auctioned. The EU ETS, launched in 2005, is the best-known example; people often just say 'the ETS'.

Example sentences

1. Our cement plant falls under the emissions trading system, so we must surrender allowances every year.

2. Prices in the emissions trading system rose after the cap was tightened.

Common collocations

• EU ETS
• cap and trade
• emission allowances
• surrender allowances
• free allocation

Related terms

• carbon pricingPolicies that put a price on greenhouse gas emissions, mainly through carbon taxes or emissions trading systems, so that polluters pay and cleaner options become more attractive.
• carbon taxA tax charged on fossil fuels or on greenhouse gas emissions, usually set as a fixed amount per tonne of CO2, to make polluting activities more expensive.
• carbon creditA tradable certificate representing one tonne of CO2e that a certified project has reduced, avoided or removed from the atmosphere.
• Carbon Border Adjustment Mechanism (CBAM)An EU measure that puts a carbon price on certain imports, such as steel, cement, aluminum and fertilizers, based on the emissions released when they were produced.
• greenhouse gas inventoryA structured account of all the greenhouse gases that a country, city or company emits and removes in a given year, broken down by source and by gas.

This word in other fields

The same English word can have a different meaning in another field:

• emissions trading system · Energy & Renewables

More terms: Environmental Policy and Law

• Paris Agreement
• environmental permit
• polluter pays principle
• nationally determined contribution (NDC)
• COP
• phase out
• extended producer responsibility (EPR)
• European Green Deal