Reducing harmful greenhouse gas emissions is one of the most important means of stopping climate change. Industry in particular is required to stop burning fossil fuels and switch to renewable energies. In the EU as well as in Germany, politicians are focussing on the principle of emissions trading for this purpose. This means that anyone who emits CO2 must pay for it by purchasing the corresponding certificates. Conversely, for companies this means that reducing CO2 emissions can directly contribute to saving costs.
Emissions trading: definition and impact
Emissions trading is a market-based instrument for reducing greenhouse gas emissions. The aim is to limit overall emissions in order to combat climate change. In the process, politicians set an upper limit for the maximum permissible emissions. Emission allowances are distributed or auctioned to companies in accordance with this limit, authorising the holders of these allowances to emit a specified amount of emissions. The option to sell certificates to other companies if fewer emissions are produced than planned opens up the opportunity for additional revenue. The aim is to make climate protection financially worthwhile. Emissions trading therefore promotes cost-efficient emission reductions and investments in innovative technologies to reduce CO2 emissions. Another positive aspect is that the revenue from the auctions is channelled into climate protection measures or social compensation.
What is European emissions trading?
At EU level, the EU Emissions Trading Scheme (EU ETS for short) was launched back in 2005. This makes it the world’s oldest and largest trading system for greenhouse gas emissions. The European emissions trading scheme includes companies in the 27 EU member states as well as Iceland, Liechtenstein and Norway, which must provide a certificate for every tonne of CO2 emitted. The system works according to the cap-and-trade principle: the EU sets an upper limit (cap) for the total permitted emissions, which is gradually reduced over the years in order to achieve the set emissions targets. Affected companies receive or purchase emissions certificates at auction, which they can trade as required. Companies must pay penalties for emissions that exceed the amount of their own CO2 certificates.
Criticism of emissions trading
According to experts, the principle of emissions trading is one of the most important instruments for achieving climate targets. Nevertheless, there has long been criticism – especially of European emissions trading. The problem: for many years, there were far too many CO2 certificates on the market for various reasons. As a result, prices fell so sharply that it was cheaper for companies to buy certificates than to invest in measures to reduce emissions. In recent years, the EU has therefore made adjustments and adopted a reform of the existing emissions trading system in 2023: the cap on emissions is to fall more quickly. In addition, it was decided that gradually fewer free certificates would be issued to companies.
Methods and technologies for avoiding CO2 emissions
In view of these stricter regulations, emissions trading represents a not insignificant financial incentive for companies to reduce their consumption of fossil fuels and replace them completely in the long term. Various methods and technologies are available to them for this purpose.
Electrification with renewable energies
Electrifying their processes with renewable energies offers companies a promising opportunity to significantly reduce their CO2 emissions. The use of wind or solar energy ensures that the electricity required is generated in a climate-friendly way. In addition, by installing their own renewable energy systems, such as PV systems on company premises, companies can reduce their energy costs in the long term and guarantee a reliable and sustainable energy supply.
Increasing energy efficiency
One of the most effective measures to reduce CO2 emissions is to invest in energy-efficient technologies: energy that is not consumed cannot cause emissions. Investing in modern production facilities that are less energy-intensive and therefore reduce CO2 emissions, as well as in innovative technologies, can therefore help to save costs in the long term.
Energy storage as a key technology
These innovative technologies include modern energy storage systems such as the ThermalBattery™ from ENERGYNEST. By using energy storage solutions, companies can optimise the efficient use of renewable energy and further reduce their dependence on fossil fuels. Energy storage systems make it possible to store surplus energy from renewable sources such as solar and wind energy and draw on it when needed. This ensures a stable energy supply and minimises the use of emission-intensive backup systems.
