The basic principles of emissions trading stem from an economic theorem by Ronald Coase (the Coase Theorem). This theorem posits that market participants can manage external costs if they can negotiate the allocation of resources and exchange them at no cost.

Building on this, economist J.H. Dales developed the basic concept of emissions trading by proposing the creation of a market for pollution rights. This approach enabled policymakers to set a concrete cap on pollution for the first time. In emissions trading, pollution rights correspond to emission allowances, with one allowance entitling the holder to emit 1 metric ton of CO2 equivalents. The price of the allowance is determined by the market.

Liechtenstein allocates allowances to facility operators covered by the Emissions Trading Directive, with the quantities allocated being significantly lower than the actual planned emissions (reduction target). Operators are free to implement reduction measures themselves or to purchase the missing emission allowances on the market. Emission reduction measures are therefore implemented where they can be carried out most cost-effectively. Emissions trading creates incentives for investments in CO2-reducing technologies and thus gives companies more flexibility to achieve their goals. Overall, costs are reduced for all companies participating in the system.

In addition, a new market emerges for emissions allowance traders, experts, and other service providers.

Under the Kyoto Protocol and the Emissions Trading Directive, there are 8 different types of so-called emission allowances. They are characterized by their origin, their countability toward the reduction target, and their transferability to subsequent commitment periods. Emissions certificates refer to so-called EU Allowances (EUAs), which are allocated by the government to facility operators. Certificates from projects in developing countries (CDM) or from other industrialized countries (JI) are referred to as emissions credits. The table below provides an overview of which emission allowances may be counted toward which system. All emission allowances are freely tradable across all systems.

Table 1: Detailed Information on Emission Allowances; adapted from the Federal Office for the Environment (FOEN).

Definitions of Emission Allowances

EUA: EU Allowances—emissions allowances allocated to companies covered by Annex 1 of the Emissions Trading Directive. The allocation of emissions allowances to individual companies is carried out through the Union Registry of the respective EU/EEA member state.

AAU: Assigned Amount Units—emission allowances allocated to individual countries by the Kyoto Protocol for a commitment period. The allocated amount of AAUs is based on the emission reduction target that countries must achieve during the corresponding commitment period. In the Swiss system—similar to the EU ETS—AAUs are allocated to Liechtenstein companies with reduction obligations under the CO2 Act.

RMU: Removal Units—emission allowances that can be generated in addition to AAUs as a result of an increase in national sink capacity. Since sinks do not contribute to permanent CO2 reduction, RMUs are invalidated at the end of the commitment period.

ERU: Emission Reduction Units—emission credits generated through the implementation of Joint Implementation (JI) projects between two developed countries.

CER: Certified Emission Reductions—emission credits generated through the implementation of CDM projects by developed countries in developing countries.

tCER: Temporary CER—an emission credit issued for a CDM project involving afforestation or reforestation. tCERs expire at the end of the next commitment period and may be renewed as long as the sequestration of CO₂ in forests can be verified using defined methods.

lCER: A long-term CER is an emission credit issued for a CDM project involving afforestation or reforestation. lCERs expire at the end of the project’s total duration and therefore cannot be renewed. However, they must be replaced by other emission credits if proof of CO₂ sequestration is not provided every five years.

Any natural or legal person is entitled to apply for an account in the Union Registry in one of the Member States. The account is opened once all requirements of the EU and the Member State have been met.

All information and documents (legal basis, application form) regarding the opening of an account in the Liechtenstein Union Register can be found on our website. The Liechtenstein Union Register can be found at www.emissionshandelsregister.li

To open an account in the Liechtenstein Union Register, each applicant must submit a correctly completed application form (including all required documents) to the Office of Environment electronically.

After a thorough review of all data and documents, the applicant and all account authorized representatives will receive their personal activation key via certified mail. This key is required to access the secure area of the Union Register.

Pursuant to Article 16, paragraph 3, of the Emissions Trading Act, a third-party account representative with permanent residence in Liechtenstein is required to open an account in the Liechtenstein Union Registry. You can find potential candidates at:

Pursuant to Article 14(3) of the Emissions Trading Act (EHG), the registry administrator shall allocate emission allowances to the accounts of facility operators no later than February 28 of the relevant year.

A transaction is defined as any national or international transfer of emission allowances between two linked accounts. This includes the surrender and cancellation of emission allowances.

By April 30 of the following year (Art. 15(1) EHG), a facility operator must submit emission allowances (emission certificates and up to 8% emission credits) to the Office of Environment in an amount equal to the verified emissions reported in the emissions report.

The Liechtenstein Unionsregister meets the security requirements of the EU and the UN and offers 6 security levels. You can find more information in our security policies on this website under the "Unionsregister" menu. Of course, the Union Register also uses the SSL (Secure Socket Layer) security protocol. SSL ensures that you are indeed connected to the Union Register’s server and enables secure and confidential data transfer using 128-bit encryption.