Scope & Coverage
Defining the scope and coverage of an ETS implies decisions on which greenhouse gases and sectors should be included in the scheme, and what the minimum size (threshold) should be for the emitters involved. Moreover, the point of regulation, referred to in terms of upstream and downstream, determines the point in a supply chain that is targeted by an ETS. In theory, the broader the scope of an ETS and the more comprehensive its coverage, the higher its environmental effectiveness and economic efficiency. In practice, certain limitations, like which parts of a supply chain have the best abatement options, may affect feasibility, fairness, and the appropriate incentives.
Carbon dioxide (CO₂) is the most common greenhouse gas and is therefore usually the first gas covered in an ETS. When other gases, like methane (CH4), nitrous oxide (N₂O), or fluorinated gases (SF6, HFC, PFC, etc.) are included in a system, CO2 still serves as the point of reference and is the gas against which others are measured, expressed in terms of tons of carbon dioxide equivalents (CO₂e). In some sectors, such as electricity and large industry, emissions are easier to measure and account for than in others, which makes them the most feasible for initial inclusion in an ETS. Other sectors like agriculture or transport may then follow at a later stage or be addressed by other measures. Minimum size thresholds in a sector determine when an installation must participate in an ETS, based on its emissions, units of production, or installed capacities. Limiting the number of covered entities to larger ones reduces administrative burdens in system management and can help avoid disproportionately high transaction costs for smaller businesses. An ETS that covers a variety of gases, sectors, and installations with a range of different abatement options fosters competition and thus decreases overall mitigation costs.
Determining the point of regulation means deciding where along a supply chain actors should be held responsible for their emissions. This involves weighing the feasibility of measuring emissions of different actors, the number of actors, and their ability to mitigate their emissions. Upstream regulation focuses on implied emissions from natural resource extraction, such as coal mining or oil extraction, even if these are not burned at that point. Downstream regulation addresses the end users on the supply chain, such as consumers. Usually, it is most effective to regulate actors with the greatest control over their abatement options; often, this is at the point where the gases are actually emitted, for instance at a power plant or steel mill, rather than the embedded or indirect emissions involved in a product either upstream or downstream.

Emissions covered by the ETS | GHG covered | Sectors covered and thresholds |
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Canada - Nova Scotia | ||
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CO2, CH4, N2O, SF6, NF3, HFCs, PFCs | The program covers the industrial and electricity sectors, as well as fuel suppliers (upstream coverage of transport and heating). | |
Canada - Québec Cap-and-Trade System | ||
CO2, CH4, N2O, SF6, HFCs, PFCs, NO3, and other fluorinated GHGs | FIRST COMPLIANCE PERIOD (2013-2014): Electricity, Industry. | |
China - Beijing pilot ETS | ||
CO2 | Industrial and non-industrial companies and entities, including electricity providers, heating sector, cement, petrochemicals, other industrial enterprises, manufacturers, service sector, and public transport. | |
China - Chongqing pilot ETS | ||
CO2, CH4, N2O, HFCs, PFCs, SF6 | Power, electrolytic aluminum, ferroalloys, calcium carbide, cement, caustic soda, and iron and steel. | |
China - Fujian pilot ETS | ||
CO2 | Electricity, petrochemical, chemical, building materials, iron and steel, nonferrous metals, paper, aviation, and ceramics. | |
China - Guangdong pilot ETS | ||
CO2 | Power, iron and steel, cement, papermaking, aviation, and petrochemicals. | |
China - Hubei pilot ETS | ||
CO2 | Power and heat supply, iron and steel, nonferrous metals, petrochemicals, chemicals, textile, cement, glass and other building materials, pulp and paper, ceramics, automobile and equipment manufacturing, food, beverage, and medicine producers, and water supply. | |
China - Shanghai pilot ETS | ||
CO2 | Airports, domestic aviation, chemical fibers, chemicals, commercial, power and heat, water suppliers, hotels, financial, iron and steel, petrochemicals, ports, shipping, nonferrous metals, building materials, paper, railways, rubber, and textiles. | |
China - Shenzhen pilot ETS | ||
CO2 | Power, water, gas, manufacturing sectors, buildings, port and subway sectors, public buses, and other non-transport sectors. | |
China - Tianjin pilot ETS | ||
CO2 | Heat and electricity production, iron and steel, petrochemicals, chemicals, and exploration for oil and gas. Papermaking, aviation, and building materials from 2019. | |
China National ETS | ||
CO2 | Power sector (including combined heat and power, as well as captive power plants of other sectors). | |
EU Emissions Trading System (EU ETS) | ||
CO2, N2O, PFCs | PHASE 1 (2005-2007): Power stations and other combustion installations with >20MW thermal rated input (except hazardous or municipal waste installations), industry (various thresholds) including oil refineries, coke ovens, and iron and steel plants, as well as production of cement, glass, lime, bricks, ceramics, pulp, paper, and board. | |
Japan - Saitama Target Setting Emissions Trading System | ||
CO2 | Consumption of fuels, heat, and electricity in commercial and industrial buildings | |
Japan - Tokyo Cap-and-Trade Program | ||
CO2 | Consumption of fuels, heat, and electricity in commercial and industrial buildings. | |
Kazakhstan Emissions Trading Scheme | ||
CO2 | PHASE ONE (2013): Power sector and centralized heating. Extractive industries and manufacturing: oil and gas mining, metallurgy, chemical industry. | |
Korea Emissions Trading Scheme | ||
CO2, CH4, N2O, PFCs, HFCs, SF6 | PHASE ONE (2015-2017): 23 subsectors from the following five sectors: power, industry (e.g., iron and steel, petrochemical, cement, oil refinery, nonferrous metals, paper, textile, machinery, mining, glass, and ceramics), buildings, waste, and transportation (domestic aviation). | |
Mexico | ||
CO2 | The pilot ETS will cover the energy and industrial sectors. The energy sector encompasses electricity generation, transmission, and distribution, as well as fossil fuel extraction, production, transport, and distribution. | |
New Zealand Emissions Trading Scheme | ||
CO2, CH4, N2O, SF6, HFCs, and PFCs | Sectors were gradually phased in over time. | |
Swiss ETS | ||
CO2, NO2, CH4, HFCs, NF3, SF6, and theoretically PFCs. (In principle, all these gases are covered in accordance with the ‘CO2 Ordinance.’ In practice, monitoring is required only for CO2, NO2, and PFCs, since their share is negligible.) | MANDATORY PARTICIPATION: Industries listed under Annex 6 of the revised ‘CO2 Ordinance’ must participate in the Swiss ETS. These include 25 categories, including companies from the cement, chemicals and pharmaceuticals, refineries, paper, district heating, steel, and other sectors. Since 2020, the ETS covers aviation (domestic and outbound flights to the EEA) and fossil-thermal power plants. | |
USA - California Cap-and-Trade Program | ||
CO2, CH4, N2O, SF6, HFCs, PFCs, NF3, and other fluorinated GHGs. | FIRST COMPLIANCE PERIOD (2013-2014): | |
USA - Massachusetts Limits on Emissions from Electricity Generators | ||
CO2 | Large electricity generators subject to RGGI (>= 25 MWe). | |
USA - Regional Greenhouse Gas Initiative (RGGI) | ||
CO2 | Fossil Fuel Electric Generating Units | |
Colombia | ||
No information available yet. | No information available yet. | |
German National Emissions Trading System | ||
CO2 | The CO2 price will be charged to fuel distributors and suppliers and applies to all fuels used in the transport sector and for heating purposes, e.g., fuel oil, LPG, natural gas, coal, gasoline, and diesel. | |
Montenegro | ||
No information available yet. | No information available yet. | |
Ukraine | ||
No information available yet. | No information available yet. | |
USA - Pennsylvania | ||
No information available yet. | No information available yet. | |
USA - Transportation and Climate Initiative (TCI) | ||
No information available yet. | No information available yet. | |
USA - Virginia | ||
No information available yet. | No information available yet. | |
Brazil | ||
No information available yet. | No information available yet. | |
Chile | ||
No information available yet. | No information available yet. | |
Indonesia | ||
No information available yet. | No information available yet. | |
Japan | ||
No information available yet. | No information available yet. | |
Pakistan | ||
No information available yet. | No information available yet. | |
Philippines | ||
No information available yet. | No information available yet. | |
Taiwan, China | ||
No information available yet. | No information available yet. | |
Thailand | ||
No information available yet. | No information available yet. | |
Turkey | ||
No information available yet. | No information available yet. | |
United Kingdom | ||
No information available yet. | No information available yet. | |
USA - New Mexico | ||
No information available yet. | No information available yet. | |
USA - New York City | ||
No information available yet. | No information available yet. | |
USA - North Carolina | ||
No information available yet. | No information available yet. | |
USA - Oregon | ||
No information available yet. | No information available yet. | |
USA - Washington | ||
No information available yet. | No information available yet. | |
Vietnam | ||
No information available yet. | No information available yet. |
Studies
Hobbs, B.F., Bushnell, J., Wolak, F. A. (2010) Upstream vs. Downstream CO2 Trading: A Comparison for the Electricity Context. Energy Institute at Haas.
Pew Center on Global Climate Change, 2008: Scope of a Greenhouse Gas Cap-and-Trade Program. Congressional Policy Brief.
Pizer, W.A. (2008) Scope and point of regulation for pricing policies to reduce fossil fuel CO2 Emissions. Resources for the Future.
Official Websites and Presentations
California
Instructional guidance on the scope of the cap-and-trade program (September 2012)
New Zealand
NZ ETS Website - Information on participants in the NZ ETS
Québec
Official information on participants in Québec's cap-and-trade program
RGGI
RGGI Website - Information on regulated sources
Switzerland
ETS Regulation - List of regulated sources (German and French)