The EU will strengthen its Emissions Trading System from 2013 by expanding it to include greenhouse gases other than carbon dioxide and to incorporate all major industrial emitters. The new measures will also reduce the emission allowances put on the market year on year so that emissions covered by the trading scheme will be reduced by 21% from 2005 levels in 2020.

Set up in January 2005, this "cap and trade" system has enabled companies to buy extra allowances to emit carbon dioxide over and above their EU-imposed limit. Meanwhile, any company able to keep within its allowance, perhaps by investing in new "cleaner" technology, could trade its spare carbon allocation for cash. When it was first formed, the system only covered carbon dioxide emissions from large emitters in the power and heat-generation industry and in selected energy-intensive sectors such as combustion plants, oil refineries, coke ovens, iron and steel plants and factories making cement, glass, lime, bricks, ceramics, pulp and paper. This amounted to around 45% of the EU’s carbon dioxide emissions, or roughly 30% of its greenhouse gas emissions. The new system should cover more than 40% of total emissions, including those from aviation.

"The EU Emissions Trading Scheme had a rocky start in its initial period of 2005–7 due to over-allocation of emissions credits and application of varying approaches among Member States,” said a spokesman from the independent Institute for European Environmental Policy. “However, a great deal has been learnt from this experience and the suggested improvements are a significant step forward, including the harmonized allocation process and increased levels of auctioning."

The Institute added that while concerns have been expressed about the trading scheme’s impact on European business, trading was devised in response to businesses’s desire for flexibility in achieving compliance and the scheme "should be judged in light of other options for emission reduction, not the status quo".

The EU announcements also include legislation to ensure the safe and environmentally sound use of carbon capture and storage in conjunction with fossil fuel burning. On the research side, the Commission has proposed an increase in annual spending on energy research of at least 50% for the next seven years, along with a new European Energy Technology Plan, which will be put forward at the European Council in Spring 2008.

Future impact
But will all this be enough? According to researchers at the Netherlands Environmental Assessment Agency (MNP), emissions of the six greenhouse gases named by the Kyoto protocol would have been 7% higher in 2005 without EU environmental policies in place. But if the EU is to meet its target of reducing emissions by 80% of their 1990 levels in 2020, the impact of EU policy on greenhouse gas emissions will need to increase by a factor of three "halfway between 1990 and 2020". For carbon dioxide, the policy impact will need to increase by a factor of almost five, as future emissions reductions are likely to rely more heavily on this gas.

The team looked at the impact of EU policies for renewable energy, landfill gas, nitrous oxide emissions from industry, combined heat-power generation (CHP), efficiency improvements in the built environment, common agricultural policies, F-gases, passenger cars, and efficiency improvements and fuel switch in industry and the energy sector.

Of these, policies aimed at renewable energy, CHP, reduction of nitrous oxide from industry and reducing methane emission from landfills produced the largest decreases. Renewable energy policies, for example, are estimated to have saved around 96 Mt of carbon dioxide equivalent in 2005 by increasing renewable electricity production in the 25 EU countries four-fold between 1990 and 2005, and boosting production of renewable heat and liquid biofuels for transport by 20%. Similarly, the amount of electricity produced by cogeneration (combined heat-power) plants doubled and the amount of heat produced by cogeneration increased by 40% between 1990 and 2004. The MNP reckons that this reduced carbon dioxide emissions by about 57 Mt. Cogeneration has been promoted in the EU by national policies such as subsidies, fiscal measures, feed-in tariffs and obligations.

So while individual EU nations begin implementing the many measures that will be needed for them to meet their targets, one thing is certain – it’s a complex process but they will be under close scrutiny.

• The European Commission will hold its second EU Sustainable Energy Week from 28 January – 1 February .