About this paper

Sectors not included under the EU Emissions Trading Scheme (EU ETS), the so called non-ETS sectors are covered under the Effort Sharing Decision (ESD) which defines the 2020 greenhouse gas reduction targets for these sectors for each Member State. Although these non-ETS sectors include nearly 60% of the EU’s emissions, there has been little focus on the non-ETS sectors and the functioning of the ESD. The EU ETS started already in 2005. The ESD, on the other hand, is part of the 2020 climate and energy package which started only in 2013. The relatively short experience with the ESD may be one of the reasons for the limited awareness about the ESD. Few countries and even NGOs have thought about either the risks of potential loopholes or the opportunities the ESD offers to go beyond the current mitigation commitments.

This paper aims at providing a comprehensive overview on how non-ETS sector mitigation targets are set and implemented. It explains the compliance cycle and introduces the legislative framework for the ESD under the 2020 climate and energy package. Finally, it describes the various trading and flexibilities options and then explains how the different legislative pieces work together. How Member States are doing in implementing their ESD targets is discussed in “Tackling 60% of the EU’s Climate Problem: Member States progress in implementing the Effort Sharing Decision”.