EU emissions trading system
The EU Emissions Trading System (EU ETS) is a carbon market based on a system of cap-and-trade of emissions allowances for energy-intensive industries, the power generation sector and the aviation sector.
The new rules increase the overall ambition of emissions reductions by 2030 in the sectors covered by the EU ETS to 62% compared to 2005 levels.
Maritime transport emissions
Emissions from shipping will be included within the scope of the EU ETS for the first time. Obligations for shipping companies to surrender allowances will be introduced gradually: 40% for verified emissions from 2024, 70% from 2025 and 100% from 2026.
Most large vessels will be included within the scope of the EU ETS from the start, while other big vessels, namely offshore vessels, will be included in the ‘MRV’ regulation on the monitoring, reporting and verification of CO2 emissions from maritime transport first, and only later included in the EU ETS.
Non-CO2 emissions (methane and N2O) will be included in the ‘MRV’ regulation from 2024 and in the EU ETS from 2026.
Buildings, road transport and additional sectors
A new, separate emissions trading system for the buildings, road transport and additional sectors (mainly small industry) has been established, in order to ensure cost-efficient emissions reductions in these sectors, which have thus far proven difficult to decarbonise. The new system will apply to distributors that supply fuels to the buildings, road transport and additional sectors from 2027. A safeguard has been put in place whereby if the price of oil and gas are exceptionally high in the run up to the start of the new system, this will be postponed until 2028.
Emissions from aviation
Free emission allowances for the aviation sector will be gradually phased out and full auctioning from 2026 will be implemented. Until 31 December 2030, 20 million allowances will be reserved to incentivise the transition of aircraft operators from the use of fossil fuels.
The EU ETS will apply for intra-European flights (including departing flights to the United Kingdom and Switzerland), while CORSIA will apply to extra-European flights to and from third countries participating in CORSIA from 2022 to 2027 (‘clean cut’).
Transparency on aircraft operators’ emissions and offsetting will also be improved and a monitoring, reporting and verification framework for non-CO2 aviation effects will be set up. By 1 January 2028, building on the results of that framework, the Commission will propose, where appropriate, mitigation measures for non CO2 aviation effects.