Opinion by Mathew Carr
While it may cover slightly fewer emissions in 2027, EUETS2 will sell all its allowances rather than just some of them (as in the current EUETS1 program that started in 2005).
The EUETS 2 (European Union Emissions Trading System 2) is expected to cover approximately 450 million people in the European Union. This new system, set to launch in 2027, targets buildings and road transport sectors, along with other smaller sectors like certain industrial emissions not covered under the main EU ETS.
Euets 1 covers about 10,000 facilities but co2 pricing has boosted electricity ⚡️ prices for the whole population.
Key details about EU ETS 2:
• Sectors included:
• Fuel suppliers for road transport
• Fuel suppliers for heating in buildings
• Population affected:
• It indirectly impacts households and businesses using fuels covered by the scheme.
• Objective:
• The ETS 2 aims to reduce emissions further by making polluters pay for their carbon emissions, driving a transition to cleaner alternatives.
Source doc
EU: As a first step, the monitoring and reporting of emissions will begin in 2025.
Over the course of 2027, a 30% higher volume of allowances will be auctioned to provide market liquidity.
As in the existing EU ETS, the ETS2 will operate with a dedicated, rule-based market stability reserve to mitigate insufficient or excessive supply of allowances to the market.
During the first three years the ETS2 is operational, if the price of allowances exceeds €45 (in 2020 prices, i.e. adjusted for inflation), additional allowances may be released (sold) from the ETS2 market stability reserve to address excessive price increases.
Allowances may also be released (sold) from this reserve if the price of allowances increases too rapidly.
The rules and conditions for such a release are specified in the ETS Directive.
In case of exceptionally high gas or oil prices in 2026, the start of the ETS2 system could be postponed to 2028 to ensure a smooth implementation.
https://twitter.com/yanqinyq/status/1864038922013073733?s=46&t=4GXQezLCTz4c9vehe5x4tw
Emissions Trading System for buildings, road transport and small industry (ETS2): cap adopted for 2027
The Commission has adopted a Decision establishing the EU-wide quantity of allowances issued under the EU Emissions Trading System for buildings road transport and small industry (ETS2) for 2027. This cap will amount to 1 036 288 784 allowances for 2027 and contributes to the EU achieving its 2030 climate targets.
The calculation of the cap for 2027 is based on the average CO2 emissions from fuel combustion in the ETS2 sectors from 2016 to 2018. This average is reduced up to the year 2027 as follows:
- firstly, until 2024, through a linear reduction trajectory based on all emissions within the scope of the Effort Sharing Regulation;
- secondly, for the years 2025-2027, through an annual linear reduction factor of 5.1% in accordance with Article 30c(1) of the ETS Directive.
The ETS2 cap for 2027 includes the States of the European Economic Area and the European Free Trade Association (EEA-EFTA States).
The ETS2 cap for 2028 will be determined at a later stage, based on the average CO2emissions reported by the ETS2 regulated entities for the years 2024 to 2026.
The Decision, to be published shortly in the Official Journal, fulfils the Commission’s obligation under the ETS Directive to publish the Union-wide quantity of allowances for the year 2027 by 1 January 2025.
Details
Publication date
3 December 2024
Author
Directorate-General for Climate Action
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(Adds context, extra selling)