Emissions Trading Scheme (EU ETS). Trading Scheme within the European Union was launched on January 1, 2005. The scheme is based on Directive 2003/87/EC, which entered into force on 25 October 2003. The Phase I (2005 - 2007) has received much criticism due to oversupply of allowances and the distribution method of allowances (via grandfathering rather than auctioning), Phase II (2008-2012) links the ETS to other countries participating in the Kyoto trading system. In Phase III, the share of auctioning will increase. In 2013 at least 50 percent of the total amount of allowances will be auctioned, and this share will increase, as free allocation (grandfathering) will be phased out towards 2020.

The 6 major GHGs (that are recognised by Kyoto Protocol) are shown in the table below, however there are others, for example water vapour and ozone.