Emissions trading

Emissions trading is a market-based means to control emissions. The government has a number of ways by which to control and curb emissions. Traditionally, emissions have been limited with administrative instruments, which include various kinds of volume restrictions and guideline values. Economic instruments, on the other hand, include anti-pollution taxes, investment and production subsidies and emissions trading.

Emissions trading is the trading of emission allowances. The facilities or companies covered by the scope of the trading need an amount of emission allowances that is equal to their emissions with which they can engage in the trading. The total amount of emission allowances on the market determines the total emissions of all facilities covered by the scope of the emissions trading. As a result of the trading, an individual operator’s emissions may vary.

The emission allowances are allocated to the market participants on the basis of historical emissions, for example, or by auction. In Finland, a little more than a half of greenhouse gas emissions fall under the scope of emissions trading.

Over the past few years, attention in Europe has drawn increasingly to climate change and the emissions trading of greenhouse gases. Other emissions can also be traded. A good example of such this is the trading of sulphur dioxide in the United States.

The Energy Authority as the emissions trading authority

The national emissions trading authority in Finland is the Energy Authority, charged with, among other things, the issuing and monitoring of emissions permits, the maintenance of the emissions trading registry, monitoring compliance with obligations arising from emissions trading and the approval of emissions trading verifiers.

The Energy Authority also enters emission allowances every year in the facility-specific accounts of the operators in the emissions trading registry. The entries are based on the government’s decision on the allocation of emission allowances.