If yes, please specify if the company falls under the EU Emissions Trading System (EU ETS).

  • Radia Guira





If yes, please specify if the company falls under the EU Emissions Trading System (EU ETS)

Understanding the EU Emissions Trading System (EU ETS)

When considering the environmental aspect of ESG (Environmental, Social, Governance) criteria, the EU Emissions Trading System (EU ETS) plays a pivotal role. The EU ETS is the cornerstone of the European Union’s policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. Being the first large emissions trading system in the world and still the biggest, it was launched in 2005 to promote greener and more sustainable practices among large polluters.

In essence, the system works on a cap-and-trade principle, where a cap is set on the total amount of certain greenhouse gases that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances, which they can trade with one another as needed. Each allowance gives the holder the right to emit one tonne of CO2 or the equivalent amount of another greenhouse gas.

The system covers more than 11,000 power stations and industrial plants in the 27 EU member states, Iceland, Norway, and Liechtenstein, as well as aviation activities in these countries. It includes sectors like power generation, manufacturing industries, and commercial airlines. If your company falls under these categories, it is likely that you are part of the EU ETS and must comply with its regulations.

Determining if Your Company is Subject to the EU ETS

To calculate your ESG score accurately, it’s essential to know whether your company is subject to the EU ETS. The inclusion criteria are rather specific and depend on various factors, including the size of the installation, the type of activities carried out, and the level of emissions.

For example, power plants and combustion plants with a rated thermal input exceeding 20MW (except hazardous or municipal waste installations) are included, as well as a range of industrial activities such as oil refining, production and processing of ferrous metals, and mineral industry. Additionally, aviation activities that operate intra-EU flights are also covered. It’s crucial to understand the full scope of the directives and to assess your company’s activities against the EU ETS criteria for inclusion.

If your company falls within the scope of the EU ETS, you must adhere to monitoring and reporting requirements and surrender enough allowances to cover all your reportable emissions each year. Non-compliance can result in significant fines and penalties, so it’s vital to evaluate your status diligently.

Reporting and Compliance for Companies under the EU ETS

Compliance with the EU ETS is not only about understanding whether your company is included; it’s also about actively engaging with the system’s requirements. This includes accurate emissions monitoring, reporting, and verification (MRV) processes. The MRV process is crucial as it ensures the credibility and integrity of the trading system. For this, companies covered by the EU ETS are required to develop and submit an annual Emissions Monitoring Plan (EMP).

An EMP is a detailed document that describes how a company will monitor and report emissions. This document must be approved by the national authority and is subject to annual reviews. The monitoring plan should cover all emission sources related to the company’s activities and must follow the methodologies set out in the EU ETS Directive and subsequent decisions.

Companies must also ensure that they maintain and are able to provide accurate records for each tonne of CO2 emitted. This accountability is important not only for regulatory compliance but also for stakeholders who are increasingly mindful of the ESG performance of businesses. Accurate reporting of emissions data contributes to better ESG scores, which can affect investment attractiveness, credit ratings, and overall market perception.

Understanding and complying with the EU ETS can be complex, but it is a significant component of a company’s environmental responsibility. By adhering to the system, companies not only avoid penalties but also contribute to the larger goal of reducing greenhouse gas emissions. For businesses looking to improve their ESG score, active participation in the EU ETS is a clear demonstration of their commitment to environmental sustainability.

If you find the process of determining if your company falls under the EU ETS or need help with the compliance process, it’s recommended to seek expert advice or use specialized tools and services. Remember, accurate assessment and compliance with the EU ETS regulations not only benefit the environment but also bolster your company’s reputation and stakeholder confidence.


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