The EU ETS system helps reduce carbon emissions by setting limits on how much companies can emit. It allows trading of emission allowances, which can help meet reduction goals. New rules like the Market Stability Reserve are promising for controlling allowance supply. It's debated whether the system should cover all emissions or if other methods like carbon taxes are enough. The EU ETS has led to lower emissions in its sectors, but some emissions may be outsourced to other regions. This suggests a need for carbon border adjustments in certain industries.