The EU-ETS has completed its first phase (2005–2007) and is currently beginning its second phase (2008–2012). In these first two phases, the EU-ETS was limited to installations in certain industries, namely energy activities, production and processing of ferrous metals, activities involving pulp and paper production, and carbon dioxide emissions. Additionally, the structure of the EU-ETS centered on allocations through National Allocation Plans (“NAPs”) and the predominantly free distribution of allowances. Each country submitted a NAP laying out its number of allowances and its allocation plan, then at the end of the year each country reported its emissions and could sell any leftover allowances. Thus, these initial EU-ETS phases establish the system, but are limited in scope.
Lennon, Erika. “The Future of the EU Emissions Trading System.” Sustainable Development Law & Policy, Winter 2008, 38, 86.