Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC.

This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community in order to promote reductions of greenhouse gas emissions in a cost effective and economically efficient manner. This Directive also provides for the reductions of greenhouse gas emissions to be increased so as to contribute to the levels of reductions that are considered scientifically necessary to avoid dangerous climate change. This Directive also lays down provisions for assessing and implementing a stricter Union reduction commitment exceeding 20 %, to be applied upon the approval by the Union of an international agreement on climate change leading to greenhouse gas emission reductions exceeding those required in Article 9, as reflected in the 30 % commitment endorsed by the European Council of March 2007. The provisions hereby laid down shall encompass emissions from the activities listed in Annex I and greenhouse gases listed in Annex II.
The Member States shall ensure that, from 1 January 2005, no installation undertakes any activity listed in Annex I resulting in emissions specified in relation to that activity unless its operator holds a permit issued by a competent authority. Article 6 regulates the conditions for obtaining and the contents of the greenhouse gas emissions permit. From 2019 onwards, Member States shall auction all allowances that are not allocated free of charge in accordance with Articles 10a and 10c of this Directive and that are not placed in the market stability reserve. 2 % of the total quantity of allowances between 2021 and 2030 shall be auctioned to establish a fund to improve energy efficiency and modernise the energy systems of certain Member States as set out in Article 10d ( the Modernisation Fund ). The revenues generated from the auctioning of allowances should be used: (I) to reduce greenhouse gas emissions, (II) to develop renewable energies to meet the commitment of the Union to renewable energies, as well as to develop other technologies that contribute to the transition to a safe and sustainable low-carbon economy, (III) to avoid deforestation and increase afforestation and reforestation in developing countries that have ratified the international agreement on climate change, (IV) to ensure the environmentally safe capture and geological storage of carbon dioxide, (V) to finance research and development in energy efficiency and clean technologies in the sectors covered by this Directive, (VI) to improve energy efficiency, (VII) to finance climate actions in vulnerable third countries, including the adaptation to the impacts of climate change, and (VIII) to promote skill formation and reallocation of labour in order to contribute to a just transition to a low carbon economy. This Directive shall be kept under review in the light of international developments and efforts undertaken to achieve the long- term objectives of the Paris Agreement.