Emissions trading schemes are important mechanisms for achieving emissions reductions across large sectors of the economy. They will play a significant role in meeting the ambitious targets in the Climate Change (Scotland) Act.
Currently Scotland's largest emitters participate in the EU Emissions Trading Scheme. Further organisations will be involved in the CRC Energy Efficiency Scheme from April 2010.
"Cap-and-trade" emissions trading schemes work by placing a limit on emissions from a sector. This limit is divided into emissions "allowances" equal to 1 tonne CO2, which are distributed amongst participants in the sector. Some participants will find it more costly than others to reduce their emissions. These participants can purchase allowances from others who can achieve the reductions more cheaply. The market acts to direct emissions reduction effort into those areas where cuts are most easily achievable, reducing the costs of transferring to a sustainable economy.
Emissions trading policy is devolved. However, the Scottish Ministers and their UK counterparts agreed that schemes should be implemented in a uniform manner across the UK. The Scottish Government works in close partnership with the UK Government and the other Devolved Administrations to develop and implement the UK's emissions trading policy.