Emissions trading is a central element of climate protection policy in Europe and is a market-based instrument aimed at reducing greenhouse gas emissions. It was originally introduced by the Kyoto Protocol and has since developed into one of the European Union's (EU) most important tools for combating climate change. The system works on the basis of "cap-and-trade", where an upper limit for emissions is set and companies that reduce their emissions can sell their surplus allowances to others.

In Austria, emissions trading is particularly relevant for sectors such as energy production and industry, which are among the largest emitters of greenhouse gases. Under the EU Emissions Trading Scheme (EU ETS), companies operating in these sectors must purchase emission allowances to cover their CO₂ emissions. These certificates can be traded on the market, which incentivises companies to reduce their emissions in order to save costs. Emissions trading has proven to be successful as it allows the most cost-effective measures to reduce emissions to be identified.

Emission certificates are auctioned regularly and the price of these certificates is determined by supply and demand on the market. In recent years, the price of CO₂ allowances in the EU has tended to increase, reflecting the urgency of reducing emissions. Higher prices for emission allowances can motivate companies to invest in cleaner technologies and drive the transition to a more sustainable energy supply.

In Austria, there are additional measures to complement emissions trading, such as national climate protection laws and support programmes for renewable energies. These initiatives are designed to ensure that Austria achieves its climate targets while reducing its dependence on fossil fuels. The Austrian government has committed to reducing emissions by at least 36% by 2030 compared to 2005 levels and to becoming climate-neutral by 2040.

One challenge associated with emissions trading is the risk of "carbon leakage", whereby companies relocate their production to countries with less stringent emissions regulations in order to save costs. This could jeopardise the competitiveness of European industry and fail to significantly reduce global emissions. To counteract this problem, the EU has proposed measures such as the Carbon Border Adjustment Mechanism (CBAM), which aims to create a level playing field for European and non-European companies.

Overall, emissions trading plays a crucial role in efforts to reduce greenhouse gas emissions in Europe and in Austria in particular. It not only promotes the transition to a more sustainable energy supply, but also helps to develop innovative technologies and practices that are necessary to achieve the EU's climate targets. Continuous adaptation and improvement of the system will be crucial to effectively address the challenges of climate change and ensure a sustainable future.