JI and CDM credits

Credits
It must be possible to trade freely allowances and credits between states, companies covered by the ETS, and private players in order to ensure that reduction targets can be achieved as cheaply as possible.

EU regulations stipulate that anyone must be able to trade freely in EU allowances (EUAs), but it is up to the individual Member State to lay down regulations for which other types of allowances or credits can be traded. Denmark does not accept trading in the credits known as ICERs and tCERs .

Trading in allowances and credits
Each year, all ETS companies must submit the number of allowances or credits corresponding to their CO2 emissions for the previous year. The total emissions from ETS companies are controlled because only a certain amount of allowances have been allocated - or auctioned - to the companies.
 
Allowances can be traded freely within the entire EU, and the price is determined by demand and supply. The ability of ETS companies to either reduce their own emissions of CO2 or buy additional allowances provides for cost-effective climate efforts.

Instead of buying allowances, ETS companies can buy JI and CDM credits in specific amounts laid down in the National Allocation Plan. Every company’s emissions permit includes the amount of credits.
During the Kyoto period 2008-2012, all Danish ETS companies were allocated a certain number of free allowances. Allocation of these allowances is laid down on the basis of the criteria in the National Allocation Plans (NAP), primarily on the basis of historical emissions/production. 
 


Allowances trading in practice
Everyone with an account in a European emission trading registry can trade in allowances and credits (within the relevant regulations for the country in question). There are no limits on the size of transactions, although you can never sell more allowances or credits than you have in your account.
There are no fees for individual transactions, but you must pay a fee to have an account in the Registry.

You have to make agreements yourself with the people you trade with regarding price, number of allowances, date of transaction etc. The financial transaction is neither reported to the Registry nor any other emission-trading authority.

In practice there are several different options for trading in allowances:

• A number of Danish and European exchanges buy and sell allowances. Trading on an exchange can be advantageous if large numbers of allowances are to be bought or sold.
• You can also trade directly with other ETS companies.
• A third option is to use a broker/intermediary to deal with the transactions. There are already a number of firms offering this service, and it is likely that more are on the way. For a fee, you can have an experienced emissions trader deal with the practicalities.
• Finally, a market has arisen for selling single allowances to people who want to do something good for the environment. By buying an allowance and removing it from the market, you can prevent emissions of one tonne of CO2 into the atmosphere. These allowances are bought and sold by environmental organisations for example, and by companies offering their customers a green profile. 
 

Use of credits for surrender
There is a desire to be able to surrender credits, and in this connection a credit limit on the use of credits for surrender has been set for each installation which has been allocated allowances. This limit applies throughout the current period. The credit limit for the individual installation is given on the installation’s emissions permit and can also be seen under the menu: ‘Danish Emission Trading Registry’, ‘The use of credits’.