Jargon alert – what does a carbon market for transport mean?
(Transport and Environment, 30 Jan 2023) T&E explains the impact of emissions pricing for shipping, aviation and cars.
Back in December, the most used acronym in the Brussels climate bubble was ETS. Spelled out, it stands for Emissions Trading Scheme. Still confused? We break it down and explain what it will mean for transport.
To incentivise polluting industries to reduce their emissions, governments set a cap on the maximum level of emissions a sector is allowed to emit. The cap is reduced over time so that total emissions fall. Governments create permits, or allowances, for each unit of emission.
Companies must obtain and surrender a permit for their emissions. They can obtain permits from the government or through trading with other firms.
For firms that are too polluting compared to competitors, it becomes too expensive to buy permits and the company will have to cut back emissions. In other words, emitting comes at a price.