The cap represents the upper limit of GHG emissions allowed in a scheme, or in other words the total number (emissions budget) of allowances that is available to covered entities. When defining a cap, regulators seek to reconcile environmental targets with their economic feasibility. 

A fixed sum of emissions or an absolute cap ensures that emissions will not exceed a given limit, and therefore delivers a specific environmental outcome. Allowance price levels are a function of how many allowances are available under the cap, how easy it is for installations to reduce emissions, and other factors such as the weather and economic growth. Together these variables need to be taken into consideration when defining a cap. Though the carbon price also depends on these other factors, a generous emissions budget will tend to lead to the market being long and a low allowance price, making it cheap for covered entities to comply. By contrast, a relatively strict emissions budget or ‘tight cap’ means a more limited supply of allowances, or the market being short, resulting in a higher allowance price and a greater fiscal incentive to reduce emissions.

Setting a cap also implies choosing a baseline against which emissions are to be reduced. The cap is usually set in relation to historical emissions, often referred to as a base year, or projected future emissions (e.g. against a business-as-usual scenario). Clear communication of the trajectory, or the path from the basis to the target, helps capped entities plan investment to reduce emissions. 

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Overall GHG emissions (excluding LULUCF) Cap and trajectory
Canada - Ontario Cap-and-Trade Program
Emissions: 170.2 MtC02e (2014)

Note: sector specific data is from 2012 and therefore does not sum to total GHG emissions which is 2014 data.

Type of Cap: Absolute

First Compliance Period (2017-2020):

2017: 142m tCO2e, set to decline by 4.17% per year until 2020.

2018: 136m tCO2e

2019: 131m tCO2e

2020: 125m tCO2e
Canada - Québec Cap-and-Trade System
Emissions: 81.2 MtC02e (2013)

Quebec’s 2012 GHG inventory. The Québec inventory generally follows UNFCCC guidelines and draws some of its data from the Canadian GHG inventory.

Type of Cap: Absolute

The following caps are given in millions of allowances:

First compliance period (2013-2014): 23.20 each year

Second compliance period (2015-2017): 2015: 65.30; 2016: 63.19; 2017: 61.08

Third compliance period (2018-2020): 2018: 58.96; 2019: 56.85; 2020: 54.74

China - Beijing pilot system
Emissions: 188.1 MtC02e (2012)

2010 carbon emission: n.a.
2010 energy intensity: 0.493 ton SCE/10,000 CNY

Type of Cap: Absolute

46 MtCO2e (2016, existing facilities only)
China - Chongqing pilot system
Emissions: 250 MtC02e (2014)

Type of Cap: Absolute

100.4 MtCO2e (2016)
China - Fujian pilot system

No information available yet.

Type of Cap: Absolute

Around 200 MtCO2e (unofficial estimation).

Because allocation is based on actual production data, the 2016 cap will be determined after the verification on April 2017.
China - Guangdong pilot system
Emissions: 610.5 MtC02e (2012)


Type of Cap: Absolute

Total (2016): 422 MtCO2e (excl. white cement)

Existing sectors: 386 MtCO2e (2016), of which 365 MtCO2e is allocated to compliance entities and the remaining 21 MtCO2e is reserved (for new entrants and market stability). Compared to 2015, the cap was reduced by 22 MtCO2e in 2016 (with a 5 MtCO2e reduction for compliance entities).

New sectors: 12 MtCO2e (2016) for aviation, of which 11.45 MtCO2e is for compliance entities; 24 MtCO2e (2016) for paper, of which 22.7 MtCO2e is for compliance entities; unknown for the white cement sector.
China - Hubei pilot system
Emissions: 463.1 MtC02e (2012)

Type of Cap: Absolute

253 MtCO2e (2016)
China - Shanghai pilot system
Emissions: 297.7 MtC02e (2012)

Type of Cap: Absolute

155 MtCO2e (2016)
China - Shenzhen pilot system
Emissions: 153 MtC02e (2012)

Type of Cap: Absolute

31.45 MtCO2e (excluding buildings, 2015)
China - Tianjin pilot system
Emissions: 215 MtC02e (2012)

Type of Cap: Absolute

160-170 MtCO2e
EU Emissions Trading System (EU ETS)
Emissions: 4336.1 MtC02e (2014)

Aggregation of data from the National Inventory Reports (NIRs) 2013 submitted to the UNFCCC and accessed via the EEA Greenhouse Gas Data Viewer: 27 EU Member States (4,550 MtCo2e), Croatia (28.256 MtCO2e), Iceland (4.413 MtCO2e), Lichtenstein (0.22 MtCO2e) and Norway (53.4 MtCO2e). Data bases mostly on 1996 IPCC guidelines and on the IPCC Good Practice Guidances. Please refer to the respective NIRs for detailed information on methodologies used for emissions reporting.

Type of Cap: Absolute

Phases one and two (2005-2012): Decentralized cap-setting, the EU cap resulted from the aggregation of the National Allocation Plans of each Member State.

Phase three (2013-2020): Single EU-wide cap for stationary sources: 2,084 MtCO2e in 2013, which will be annually reduced by a constant linear reduction factor (currently 1.74% of the midpoint of the cap in phase 2 or around 38.3 million tons).
Aviation sector cap: 210 MtCO2e/year for 2013-2020 (not decreasing). However, following the temporary derogation of obligations related to flights to and from third countries until the end of 2016, the issuance of allowances has been adjusted accordingly.

Phase four (2021-2030): According to the European Commission's proposal for the revision of the EU ETS (see above), the annual linear reduction factor to reduce the cap on the maximum permitted emissions is proposed to be changed from 1.74% to 2.2% (48 million tons) from 2021. The linear reduction factor does not have a sunset clause and as such the cap will continue to decline beyond 2030.

Japan - Saitama Target Setting Emissions Trading System
Emissions: 38.5 MtC02e (FY2014 (demand side))

*The overall emissions figure for Saitama is higher than the total of the emissions by sector because the former includes all GHGs in Saitama, whereas the emissions by sector only measures CO2 emissions.

Type of Cap: Absolute

An absolute cap is set at the facility level, which aggregates to a Saitama-wide cap.

This is calculated according to the following formula:
Sum of base year emissions of covered facilities x compliance factor (8%/6%) x number of years of a compliance period. (First Period: four years, Second Period: five years).

Compliance factor:
First Period (FY2011-FY2014): 8% or 6% reduction below base-year emissions.
Second Period (FY2015-FY2019): 15% or 13% reduction below base-year emissions.
Japan - Tokyo Cap-and-Trade Program
Emissions: 67.3 MtC02e (2014)

The overall emissions figure for Tokyo is higher than the total of the emissions by sector because the former includes all GHGs in Tokyo, whereas the emissions by sector only measures CO2 emissions.

Type of Cap: Absolute

The absolute cap is set at the facility level that aggregates to a Tokyo-wide cap.

This is calculated according to the following formula:
Sum of base year emissions of covered facilities x compliance factor x number of years of a compliance period (five years).

Compliance factor:
First Period (FY2010-FY2014): 8% or 6% reduction below base-year emissions.
Second Period (FY2015-FY2019): 17% or 15% reduction below base-year emissions.

The higher compliance factors (8% and 17%) apply to office buildings, and district and cooling plant facilities (excluding facilities which use a large amount of district heating and cooling).
The lower compliance factors (6% and 15%) apply among others to office buildings, facilities which are heavy users of district and cooling plants, and factories.
Highly energy efficient facilities that have already made significant progress with regards to climate change measures are subject to half or three-quarters of the compliance factor.
Korea Emissions Trading Scheme
Emissions: 694.5 MtC02e (2013)

Official data of the Greenhouse Gas Inventory & Research Center of Korea (GIR)

Type of Cap:

Phase one (2015-2017): 1,687 MtCO2e, including a reserve of 89 million tCO2e for market stabilization measures, early action and new entrants.

2015: 573 MtCO2e, 2016: 562 MtCO2e, 2017: 551 MtCO2e

Caps for phase two and three have not yet been announced.
New Zealand Emissions Trading Scheme (NZ ETS)
Emissions: 81.1 MtC02e (2014)

Type of Cap: If auctioning is introduced, then a cap on the supply of NZUs, which will include those units allocated and auctioned, will be set.

The NZ ETS was originally designed to operate without a fixed cap, in order to accommodate carbon sequestration from forestry activities and to enable the full use of international carbon markets. However, as allowance supply is now restricted to domestic units (NZUs), the NZ ETS is effectively moving closer to a fixed cap. NZUs are issued either as free allocation to Emissions Intensive Trade Exposed (EITE) activities or for domestic removal activities (i.e. forestry). This means that as long as NZU prices remain below the fixed price offer level ($25/NZU [EUR 17/NZU]), the annual cap is equivalent to the quantity of free allowances and removal units issued (see Allocation).

The NZ ETS legislation includes provisions to introduce auctioning of New Zealand Units (NZUs) within an overall cap on non-forestry sectors.
Swiss ETS
Emissions: 48.6 MtC02e (2014)

Type of Cap: Absolute

Voluntary phase (2008-2012): Each participant received its own entity-specific reduction target.

Mandatory phase (2013-2020): Overall cap of 5.63 MtCO2e (2013), to be reduced annually by a constant linear reduction factor (currently 1.74%), to 4.9 MtCO2e in 2020.
USA - California Cap-and-Trade Program
Emissions: 441.5 MtC02e (2014)

Estimations generally follow a top down-approach. Bottom-up data from the Mandatory Reporting Program is used exclusively in the case of cement plants and refineries and as a complement to top-down sources for in-state electricity generation and imported electricity. All methods are consistent with IPCC 2006 guidelines.

Type of Cap: Absolute

The caps are listed below in MtCO2e allowances.

First Compliance Period (2013-2014):
2013: 162.8; 2014: 159.7.

Second Compliance Period (2015-2017): 2015: 394.5; 2016: 382.4; 2017: 370.4.

Third Compliance Period (2018-2020): 2018: 358.3; 2019: 346.3; 2020: 334.2.
USA - Regional Greenhouse Gas Initiative (RGGI)
Emissions: 460.0 MtC02e (2012)

CAIT-US GHG data are derived by the World Resources Institute from the State Inventory Tool (SIT) of the U.S. Environmental Protection Agency's (EPA's) Emissions Inventory Improvement Program (EIIP).

Type of Cap: Absolute

The original cap was stabilized at 149.7 Mt (165 million short tons) CO2 (2009-2014) with a 2.5% annual reduction factor from 2015 through 2018, totaling 10%. However, by 2012, RGGI had experienced more than a 40% reduction in emissions from the original cap. Because of these reduced emissions, the states lowered the cap to 91 million short tons in 2014 as part of the 2012 program review. The revised regulations extend the 2.5% annual reduction factor through 2020, with a 2020 cap of approximately 78 million short tons.
Canada - Nova Scotia
Emissions: 16.6 MtCO2e MtC02e (2014)

No information available yet.

Emissions: 10976 MtC02e (2012)

Type of Cap: Phase I (2017-2019): 3-5 GtCO2e/year (projection only)

Kazakhstan Emissions Trading Scheme (KAZ ETS)
Emissions: 284.3 MtC02e (2012)

Data submitted to the UNFCCC. Submissions to the UNFCCC must be made in accordance with the reporting requirements adopted under the Convention, such as The UNFCCC Reporting Guidelines on Annex I Inventories (document FCCC/SBSTA/2004/8) for Annex I Parties and Guidelines for the preparation of national communications for non-Annex I Parites (decision 17/CP.8)

Type of Cap: Absolute

Phase I (2013): 147 MtCO2 (plus a reserve of 20.6 MtCO2). This equals a stabilization of the capped entities' emissions at 2010 levels.

Phase II (2014-2015): 2014: 155.4 MtCO2; 2015: 153.0 MtCO2. This represents reduction targets of 0% and 1.5% respectively, compared to the average CO2 emissions of capped entities in 2011-2012.

[Phase III (2016-2020): 746.5 MtCO2 (plus a reserve of 21.9 MtCO2).]
Emissions: 402.7 MtC02e (2012)

No information available yet.

Emissions: 1071.9 MtC02e (2014)

No information available yet.

Emissions: 109.9 MtC02e (2013)

Type of Cap: Further research on the appropriate nature of cap is part of the Chilean Market Readiness Proposal (MRP)

In line with 20% reduction in 2020 pledge.
Emissions: 1364 MtC02e (FY2014)

No information available yet.

Emissions: 633 MtC02e (2013)

No information available yet.

Emissions: 2812 MtC02e (2014)

No information available yet.

Emissions: 284.5 MtC02e (2013)

No information available yet.

Emissions: 344.35 MtC02e (2013)

No information available yet.

Emissions: 459.1 MtC02e (2013)

National Inventory Report 2013 submitted to the UNFCCC.

No information available yet.

USA - Washington
Emissions: 92.5 MtC02e (2012)

No information available yet.

Emissions: 266 MtC02e (2010)

No information available yet.


Gilbert, A., Blinde, P., Lam, L., Blyth, W. (2014): Cap-Setting, Price Uncertainty and Investment Decisions in Emissions Trading Systems. Ecofys and Oxford Energy Associates.

Wing, S., Ellerman, A.D., Song, J. (2009):
Absolute vs. Intensity Limits for CO2 Emission Control: Performance under Uncertainty. Published in: H. Tulkens & R. Guesnerie (eds.) Design of Climate Policy. Cambridge, MA: MIT Press. 

Diekman, J. (2013): EU Emissions Trading: The Need for Cap Adjustment in Response to External Shocks and Unexpected Developments? On behalf of the German Federal Environment Agency.