If your company is covered by the European Directive on Emissions Trading (EU ETS), you are obliged to limit your carbon dioxide - emissions to allocated levels from January 1, 2005. Management of your greenhouse gas (GHG) emissions will be vital for your company’s financial performance.

In July 2003, the European Commission agreed upon the European Directive on Emissions Trading (EU ETS). The scheme requires that companies from certain sectors must limit their CO₂ -emissions to allocated levels in two periods, 2005-2007 and 2008-2012. Initially, the scheme covered CO₂ emissions only, but the second period includes all six greenhouse gases. In its first phase, EU ETS will cover some 12,500 to 15,000 installations, accounting for approximately 45-50% of the European Union’s total CO₂ emissions.

The trading scheme will covers companies in certain sectors such as energy, metals, minerals, and pulp and paper.

It is anticipated that the scope gradually will be expanded to include other sectors such as chemicals, aluminium, and transport as aviation and marine sector.

Cap and trade system
The EU ETS is a "cap and trade" system covering direct emissions. This means that a cap is set for the total emissions of all participants by allocating emission allowances of a fixed amount for a certain period. Annual emissions have to meet the set allowance target. Companies that emit more than their allocated allowance will be penalised. If your emissions are lower than the allocated target, you can sell surplus allowances or retain them for later use.

It is also envisaged that participants in the EU ETS may convert emission credits from Joint Implementation (JI) and Clean Development Mechanism (CDM) projects into EU allowances in the period 2008-2012.

What is required?
There are certain requirements under the European trading scheme that your company has to comply with:

• Each installation covered by the EU ETS will need to apply for a GHG emission permit, which shall describe the installation, technology used, sources of emissions, and measures to monitor and report emissions according to the guidelines laid down in the directive.
  
  
• Each installation will receive EU allowances for its CO emissions in the defined time periods 2005-2007 and 2008-2012.
  
  
• Each installation will need to have its total annual CO emissions verified by March 31 the following year.
  
  
• Each installation will need to surrender allowances annually covering its emissions. A surplus may be traded or retained and any deficit needs to be acquired from the market.

What do I have to do?
If your company is covered by the European Directive on Emissions Trading (EU ETS), it is recommended that you start preparing now. DNV has developed a number of climate change services that will help you comply with the EU ETS requirements:

1. Review of greenhouse gas (GHG) monitoring and reporting system
   The EU ETS requires that the carbon dioxide emissions from your installation be verified annually. DNV has developed a robust audit process for the verification of corporate GHG monitoring and reporting systems.
   
   An independent review can assess whether your company is monitoring and reporting the GHG emissions as prescribed by the EU guidelines. This can be done in advance of formal verification, in order to allow your company to make improvements to ensure that your systems are in good shape when emission reporting commences.
   
   
2. Emission Baseline Verification
   Verification of base year emissions will increase the credibility of the emission data that might be used by national authorities for your company’s allocation of allowances. An independent verification of your emission base year emissions can provide you with precise arguments the authorities can take into account during the allocation of your allowances.
   
   
3. Assessment of your current emission inventory
   An independent assessment of your current emission inventory gives an overview of your business' current emissions.
   
   
4. Annual Emission Verification
   Under the EU ETS, verification of your installations' annual emissions is required to determine whether you are in compliance with your allowance. DNV can work with you to schedule a cost effective verification process.

Where do I go from here?
Contact us for more information, or find out what we have to offer you by going to Why partner with DNV?