How ‘leaky’ is the emissions trading scheme? How do I know what I’m buying is really making a difference?

In an emissions trading market with a cap, enforcement is a key issue – the European emissions trading scheme is a legal instrument that is regulated and enforced by environmental regulators in each of the 27 EU countries. Official registries exist to ensure permits are uniquely identifiable and cannot be counterfeited or double counted.

The EU scheme also allows credits from developing countries to be used up to a certain limit. These credits are verified and regulated by the UN. When we cancel permits two things can happen – if the limit on use of overseas credits has not been reached, a credit can be purchased from these approved projects. This creates additional demand meaning increased reductions in emissions in developing countries. Or, if the limit has been reached, emissions must be reduced in the EU. Either way the act of cancelling a credit reduces the amount of pollution that would have occurred otherwise.