Under the Linking Directive, installations covered by the EU ETS may be credited for emission reductions achieved through measures taken under the Kyoto Protocol project mechanisms JI (Joint Implementation) and CDM (Clean Development Mechanism).
Companies may be credited for approved reduction units in connection with their annual surrender of emission allowances. The number of reduction units that individual installations may surrender instead of emission allowances is decided by the Swedish Environmental Protection Agency. Decisions on reduction units are made after final decisions on the allocation per installation have been made. The total quantity of reduction units used by Swedish companies may not exceed 9 926 645 tonnes of carbon dioxide during the trading period 2008–2012.
What is a reduction unit?
Reduction units are generated from emissions-reducing projects in other countries and may be either certified emission reductions (CER) or emission reduction units (ERU).
- CER is a reduction in emissions that has arisen as a result of a CDM (Clean Development Mechanism) project. CDM projects are carried out in developing countries and as well as emission reductions are intended to contribute to sustainable development.
- ERU is an emission reduction unit that has arisen as a result of a JI (Joint Implementation) project. The projects are carried out in countries that have commitments on emission limitations under the Kyoto Protocol.
How the reduction units may be used
Swedish companies included in the EU's trading scheme may both trade in and, to a certain extent, surrender reduction units (CER and ERU) to cover the previous year’s emissions. The principal rule is that an installation altogether receives reduction units equivalent to 50 per cent of 2006 emissions. The companies themselves decide in which year or years of the period the surrender of reduction units will take place. Reduction units are surrendered to the Swedish registry for emission allowances (SUS), in the same way as for emission allowances. On surrender, a reduction unit is worth the same as an emission allowance with regard to covering emissions from the previous calendar year.
There is no requirement for operators to start using reduction units on surrender, and it is instead an option made available to installations in the EU trading scheme.