Consequently, observers have accuse

Consequently, observers have accused national governments of abusing the system under industry pressure, and have urged for far stricter caps in the second phase (2008–2012).[32]

Phase II[edit]
Scope[edit]
The second phase (2008–12) expanded the scope of the scheme significantly. In 2007, three non-EU members, Norway, Iceland, and Liechtenstein joined the scheme.[33] The EU's "Linking Directive" introduced the CDM and JI credits. Although this was a theoretical possibility in phase I, the over-allocation of permits combined with the inability to bank them for use in the second phase meant it was not taken up.[34]

On April 27, 2012, the European Commission announced the full activation of the EU Emissions Trading System single registry. The full activation process will include the migration of over 30,000 EU ETS accounts from national registries. The EC has further stated that the single registry to be activated in June will not contain all the required functionalities for phase III of the EU ETS.[35]

Aviation emissions[edit]
Aviation emissions were to be included from 2012.[36] The inclusion of aviation was considered important by the EU.[37] The inclusion of aviation was estimated to increase in demand for allowances by about 10–12 million tonnes of CO2 per year in phase two. According to DEFRA, an increased use of JI credits from projects in Russia and Ukraine, would offset any increase in prices so there would be no discernible impact on average annual CO2 prices.[38]

The airline industry and other countries including China, India, Russia, and the United States reacted adversely to the inclusion of the aviation sector.[39] The United States and other countries argued that the EU did not have jurisdiction to regulate flights when they were not in European skies; China and the United States threatened to ban their national carriers from complying with the scheme. On November 27, 2012 the United States enacted the European Union Emissions Trading Scheme Prohibition Act of 2011 which prohibits U.S. carriers from participating in the European Union Emission Trading Scheme.[40][41] However, the EU insisted that the regulation should be applied equally to all carriers, and that it did not contravene international regulations. In the absence of a global agreement on airline emissions, the EU argued that it was forced to go ahead with its own scheme which included an exemption clause for countries with "equivalent measures".

Ultimately, the Commission intended that the third trading period should cover all greenhouse gases and all sectors, including aviation, maritime transport, and forestry.[42] For the transport sector, the large number of individual users adds complexities, but might be implemented either as a cap-and-trade system for fuel suppliers or a baseline-and-credit system for car manufacturers.[43]

The National Allocation Plans for Phase II, the first of which were announced on 29 November 2006, provided for an average reduction of nearly 7% below the 2005 emission levels.[44] However, the use of offsets such as Emission Reduction Units from JI and Certified Emission Reductions from CDM projects was allowed, with the result that the EU would be able to meet the Phase II cap by importing units instead of reducing emissions (CCC, 2008, pp. 145, 149).[45]

According to verified EU data from 2008, the ETS resulted in an emissions reduction of 3%, or 50 million tons. At least 80 million tons of "carbon offsets" were bought for compliance with the scheme.[46]

In late 2006, European Commission started infringement proceedings against Austria, Czech Republic, Denmark, Hungary, Italy and Spain, for failure to submit their proposed National Allocation Plans on time.[47]

State allocation plans[edit]
The annual Member State CO2 yearly allowances in million tonnes are shown in the table: