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 (CO) 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 (NO), 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 (COe). 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.

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Emissions covered by the ETS GHG covered Sectors covered and thresholds
Canada - Québec Cap-and-Trade System

CO2, CH4, N2O, SF6, HFCs, PFCs, NO3 and other fluorinated GHGs.

First compliance period (2013-2014): Electricity, Industry (>25,000 CO2e/year).

Second compliance period (2015-2017) and third compliance period (2018-2020): Sectors of first compliance period alongside the distribution and importation of fuels used for consumption in the transport and building sectors, as well as in small and medium-sized businesses.

Inclusion Thresholds: >25,000 tCO2e/year. As of 2016, fuel distributors that have distributed 200L or more of fuel (in 2015) are also subject to inclusion even if the combustion of their fuel has resulted in the emission of less than 25,000 tCO2e.

Voluntary emitters (opt-in entities): Starting in 2019, emitters from capped sectors that reported emissions between 10,000 tCO₂e/year and 25,000 tCO₂e/year may voluntarily register to the Cap-and-Trade System as a covered entity.

China - Beijing pilot system


Industrial and non-industrial companies and entities, including electricity providers, heating sector, cement, petrochemicals, other industrial enterprises, manufacturers, service sector, and public transport.

Inclusion thresholds: 5,000t CO2/year, considering both direct and indirect emissions.

Mandatory reporting: 2,000 tons of standard coal equivalent energy consumption/year.

China - Chongqing pilot system

CO2, CH4, N2O, HFCs, PFCs, SF6

Power, electrolytic aluminum, ferroalloys, calcium carbide, cement, caustic soda, and iron and steel.

Inclusion threshold: 20,000t CO2e/year.

China - Fujian pilot system


Electricity, petrochemical, chemical, building materials, iron and steel, nonferrous metals, paper, aviation, and ceramics.

Inclusion thresholds:  energy consumption 10,000 tons of coal equivalent (tce)/year for any year between 2013-2015

China - Guangdong pilot system


Six sectors: Power, iron and steel, cement, papermaking, aviation and petrochemicals.

Reporting sectors: Ceramics, textiles, non-ferrous metals, and chemicals.

Inclusion thresholds: 20,000 t CO2/year or energy consumption 10,000 tons coal equivalent (tce)/year

Guangdong plans to expand its coverage while taking the developments of the local and national carbon markets into consideration.

China - Hubei pilot system


Power and heat supply, iron and steel, non-ferrous metals, petrochemicals, chemicals, chemical fiber, cement, glass and other building materials, pulp and paper, ceramics, automobile and general equipment manufacturing, food, beverage and medicine producers.

Inclusion threshold: Annual energy consumption more than 10,000 tce in any year between 2014 and 2016 for all sectors while in vintage 2016 it was only for the power, steel, non-ferrous, chemicals, petrochemicals, building materials and pulp and paper sectors and a higher level, 60,000 tce, was set for other sectors.

China - Shanghai pilot system


The following sectors and entities are covered: Airports, aviation, chemical fiber, chemicals, commercial, power and heat, water suppliers, hotels, financial, iron and steel, petrochemicals, ports, shipping, non-ferrous metals, building materials, paper, railways, rubber, and textiles.

Inclusion thresholds: 

For power and industry:
20,000t CO2/year or 10,000 tons coal equivalent (tce)/year; and those already participated in 2013-2015 phase with 10,000 CO2/year or 5,000 tce/year.

For transport: 10,000t CO2/year or 5,000 tce/year (aviation and ports), 100,000t CO2/year or 50,000 tce/year (shipping), considering both direct and indirect emissions.

For buildings: 10,000 CO2/year or 5,000 tce/year.

China - Shenzhen pilot system


Power, water, gas, manufacturing sectors, buildings, port and subway sectors, public buses and other non-transport sectors.

Inclusion thresholds: 3,000t CO2e/year for enterprises; 20,000m2 for public buildings and 10,000m2 for government buildings.

China - Tianjin pilot system


Heat and electricity production, iron and steel, petrochemicals, chemicals, exploration of oil and gas.

Inclusion threshold: 20,000t CO2/year considering both direct and indirect emissions.

EU Emissions Trading System (EU ETS)

CO2, N2O, PFCs

Phase one (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, iron and steel plants and production of cement, glass, lime, bricks, ceramics, pulp, paper and board.

Phase two (2008-2012): In addition to Phase one sectors, aviation was introduced in 2012 (>10,000 t CO2/year for commercial aviation; >1,000 t CO2/year for non -commercial aviation since 2013) (see below).

Phase three (2013-2020): In addition to Phase two sectors, CCS installations, production of petrochemicals, ammonia, non-ferrous and ferrous metals, gypsum, aluminum, nitric, adipic and glyoxylic acid (various thresholds) were included – see Annex I of the EU ETS Directive.

Phase four (2021-30): No changes to the scope are envisaged for Phase four compared to Phase three. 

International Aviation: Emissions from international aviation have been included in the EU ETS since 2012. In November 2012, the EU temporarily suspended enforcement of the EU ETS requirements for extra-EU flights operating from or to non-European countries (so-called “stop the clock”), while continuing to apply the legislation to flights within and between countries in the EEA. Exemptions for operators with low emissions have also been introduced.

In light of the progress made under ICAO towards a global measure to reduce emissions from the aviation sector (the Carbon Offsetting and Reduction Scheme (CORSIA)), the EU has maintained the intra-EEA scope for the ETS Aviation until 31 December 2023. A further review and assessment will be carried out once there is clarity surrounding the content and nature of CORSIA as well as the extent of participation by Europe’s international partners.

Japan - Saitama Target Setting Emissions Trading System


Commercial and industrial sectors.

Inclusion Threshold: Facilities that consume energy more than 1,500kL of crude oil equivalent or more per year.

Japan - Tokyo Cap-and-Trade Program


Commercial and Industrial Sectors.

Building owners are subject to surrender obligations but large tenants, those with a floor space above 5000m2 or over 6 million kWh electricity usage per year, can assume obligations jointly or in place of building owners

Inclusion Thresholds: Facilities that consume energy more than 1,500kL of crude oil equivalent or more per year.

Kazakhstan Emissions Trading Scheme (KAZ ETS)


Energy sector (including oil and gas), mining, metallurgy and chemical industry, processing (production of building materials: cement, lime, gypsum and brick) (>20,000 tCO2/year). 

Inclusion thresholds: For Phase I (2013) and Phase II (2014-2015), thresholds were based on 2010 and 2012 emission levels. For Phase III (2018-2020), 2013-2015 emission levels are used.

Korea Emissions Trading Scheme

CO2, CH4, N2O, PFCs, HFCs, SF6

Phase one (2015-2017): 23 sub-sectors from steel, cement, petro-chemistry, refinery, power, buildings, waste and aviation sectors.

Inclusion thresholds: Company >125,000 tCO2/year, facility >25,000 tCO2/year

New Zealand Emissions Trading Scheme (NZ ETS)

CO2, CH4, N2O, SF6, HFCs and PFCs

Sectors were gradually phased-in over time.

2008: Forestry (mandatory: deforesting pre-1990 forest land, voluntary: post-1989 forest land).

2010: Stationary energy (various thresholds), industrial processing (various thresholds) and liquid fossil fuels (various thresholds).

2013: Waste (except for small and remote landfills) and synthetic GHGs (various thresholds). Synthetic GHGs not in the NZ ETS are subject to an equivalent levy.

Biological emissions (methane and nitrous oxide) from agriculture must be reported, but face no surrender obligations.

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 only required for CO2, NO2 and PFCs.)

Mandatory participation: Industries listed under Annex 6 of the revised CO2 Ordinance (25 sub-sectors) must participate in the Swiss ETS.

Inclusion Thresholds: Industries in Annex 6 generally have a total rated thermal input of >20MW.

Possible voluntary opt-in: Industries a) listed under Annex 7 of the revised CO2 Ordinance (20 sub-sectors) and b) with a total rated thermal input of >10MW. One-time binding notification must be given before 1 June 2013 for industries currently above the threshold. Industries that may become eligible for participation in the future must then register within six months after they have reached the threshold.

Possible opt-out: Industries with a total rated thermal input of >20MW, but yearly emissions <25,000 tCO2e/year in each of the past three years. Should their future emissions rise above the threshold during at least one year, they must start participating in the ETS the following year and cannot opt out anymore for the remainder of the compliance period.

Aviation: coverage of aviation is a requirement of the linking agreement between Switzerland and the EU. In July 2017, to prepare for the inclusion of aviation in the Swiss ETS, Switzerland introduced the legislation for mandatory reporting of ton-kilometer data for aircraft operators that are likely to fall within the scope of the Swiss ETS, when linked with the EU ETS. Aircraft operators submitted their monitoring plans by September 2017. Mandatory reporting began 1 January 2018 and verified monitoring reports are required by 31 March 2019. On the basis of the reported ton-kilometer data, free allocation to aircraft operators and the cap for aviation activities in the Swiss ETS will be calculated.

USA - California Cap-and-Trade Program

CO2, CH4 and N2O, SF6, HFCs, PFCs, NF3 and other fluorinated GHGs.

First compliance period (2013-2014): Covered sectors include those which have one or more of the following processes or operations: Large industrial facilities (including cement production, glass production, hydrogen production, iron and steel production, lead production, lime manufacturing, nitric acid production, petroleum and natural gas systems, petroleum refining, pulp and paper manufacturing, including cogeneration facilities co-owned/operated at any of these facilities), electricity generation, electricity imports, other stationary combustion, and CO2 suppliers.

Second compliance period (2015-2017) and beyond: In addition to the sectors listed above, suppliers of natural gas, suppliers of reformulated blendstock for oxygenate blending (RBOB) and distillate fuel oil, suppliers of liquid petroleum gas in California and suppliers of liquefied natural gas.

Inclusion Thresholds: Facilities ≥25,000 tCO2e (metric) per data year.

USA - Massachusetts Limits on Emissions from Electricity Generators


Power sector.

Large electricity generators subject to RGGI (25 MWe).

USA - Regional Greenhouse Gas Initiative (RGGI)


Fossil fuel electric generating units 

Inclusion thresholds: equal to or greater than 25MW.

Canada - Nova Scotia

No information available yet.

No information available yet.



Power sector (including combined heat and power as well as captive power plants of other sectors). 

Scope is expected to be gradually expanded to finally cover eight sectors including: petrochemical, chemical, building materials, steel, nonferrous metals, paper and aviation.

Inclusion Thresholds: Entities with annual emissions of ~26,000 t/CO2 (energy consumption of more than 10,000 tce) in any year over the period 2013–2015.


No information available yet.

No information available yet.

Taiwan, China

No information available yet.

No information available yet.


No information available yet.

No information available yet.

USA - Virginia

No information available yet.

No information available yet.


No information available yet.

No information available yet.


No information available yet.

No information available yet.


No information available yet.

No information available yet.


No information available yet.

No information available yet.


No information available yet.

No information available yet.


No information available yet.

ETS coverage has not been set yet. However, the Turkish MRV regulation, which is based on the MRV regulation in the EU Emissions Trading Scheme, establishes an installation-level MRV system. The system covers all major sources of GHG emissions from the energy (combustion of fuels with output of 20MW thermal or more) and industry sectors (coke production, metals, cement, glass, ceramic products, insulation materials, paper and pulp, chemicals over specified threshold sizes/production levels). Possibility of voluntary opt-in of additional sectors into the MRV system.

USA - Oregon

No information available yet.

No information available yet.

USA - Washington

No information available yet.

No information available yet.


No information available yet.

No information available yet.


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.