Following the results of two studies, the European Commission has decided against proposals that would have seen the creation of a NOx/SO2 trading system.

The results of the two EU studies show that a NOx/SO2 trading scheme could be more cost-effective than the Best Available Technique (BAT) based permitting system under the Industrial Emissions Directive (IED), but also revealed a number of important drawbacks that can not be ignored.

Following the 2007 Commission Communication ‘Towards an improved policy on industrial emissions’, the Environment Directorate-General (DG Environment) - the EU body charged with protecting, preserving and improving the environment for present and future generations - has been investigating whether and how a NOx/SO2 emissions trading scheme could be applied as a replacement to the BAT-based permitting system of the IPPC Directive / IED.

To this end, two studies have been carried out assessing the environmental and economic impacts of a number of different trading scenarios as well as the overall societal costs and benefits of a European-wide NOx/SO2 trading system.

The results of the studies show that a trading scheme for these two pollutants could be more cost-effective than the BAT-based permitting system under the IED, but also reveal a number of important drawbacks that can not be ignored.

The main findings of the reports are:

1. The implementation of the IED will require industry to make investment decisions soon in order to comply with the strengthened BAT requirements. Following the route of an emissions trading instrument would open a period of uncertainty and delay implementation of the IED, thus hampering the achievement of its objectives.

2. Concerns remain that at local level the effects of a trading system could pose problems in terms of endangering the achievement of the EU air quality objectives and limit values.

The Commission has therefore decided not to pursue action with regard to a NOx/SO2 trading system.