Emission trading is a market based mechanism for efficient reduction of greenhouse gas emissions. Participating companies receive free allocation or buy allowances on the market and if they reduce emissions, they can keep the spare allowances for their future needs or sell them to other companies that are short of allowances. As a result, emissions are cut at the lowest costs. Two interconnected emission trading systems are currently operated in the Czech Republic: the European Union Trading Scheme (EU ETS), which is the largest trading system and the Kyoto Protocol mechanisms (Clean Development Mechanism, Joint Implementation Projects, and International Emission Trading).
EU ETS covers over 11 000 installations from the sectors of energy, steel, cement, paper, glass, ceramics, chemical and other industry fields in 31 countries and accounts for 2 bil. t CO2 per year. In year 2020 the EU ETS emissions will be 21% below 2005 level.
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