Luxembourg's 7th National Communication Set up by Directive 2003/87/EC,130 the system is now in its 3rd phase covering the period 20132020. For this latest phase, major reform took effect (Directive 2009/29/EC131). The biggest changes have been the introduction of an EU-wide cap on emissions - reduced by 1.74% each year so that in 2020, GHG emissions from the EU ETS sector will be 21% lower than in 2005 - and a progressive shift towards auctioning of allowances in place of cost-free allocation that was the rule for the two previous phases. Concretely, a cap is set on the total amount of certain GHG that can be emitted by installations covered by the system. The cap is reduced over time so that total emissions fall. Within the cap, companies receive or buy emission allowances that they can trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world. The limit on the total number of allowances available ensures that they have a value. After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances, 132 Renewable energy