The EU Emissions Trading System (EU ETS) is the European Union's central instrument for reducing greenhouse gases. It is based on the cap-and-trade principle, which sets an upper limit on the total amount of emissions that participating companies are allowed to emit. Companies receive or purchase emission allowances that they need to cover their emissions. Certificates that are not required can be traded. The cap is gradually lowered in order to reduce emissions and thus achieve the EU's climate targets.

This system also allows emission reductions from the use of biomethane to be taken into account under certain conditions. The most important requirements are summarized in the following section: