Effort sharing 2021-2030: targets and flexibilities

The Effort Sharing Regulation (ESR) establishes for each EU Member State a national target for reducing greenhouse gas (GHG) emissions by 2030 in the sectors of domestic transport (excluding aviation), buildings, agriculture, small industry, and waste. In total, the emissions covered by the Effort Sharing Regulation account for around 66% of the EU’s total domestic emissions.

Initially adopted in 2018, the Effort Sharing Regulation (ESR) was revised in 2023. Under the updated framework, Member States’ new national targets will collectively contribute to a 40% reduction of ESR emissions, at EU level, (compared to 2005 levels) instead of 30%, as was initially planned.

The revision was adopted as part of a package of proposals aimed at reducing the EU’s emissions by 55% by 2030 (compared to 1990 levels) and deliver the European Green Deal.

Member States’ targets

As you can see in the table below, EU Member States now have emission reduction targets ranging from 10 to 50% compared to 2005 levels.

The Regulation recognises the different capacities of Member States to take action by differentiating Member States’ targets according to Gross Domestic Product (GDP) per capita. This ensures fairness, as higher-income Member States take on more ambitious targets than lower-income Member States. However, an approach based solely on relative GDP per capita would mean that some Member States would have relatively high costs for reaching their targets. To address this, targets are adjusted to reflect cost-effectiveness for those Member States with a GDP per capita above average.

The 2023 increase in Member States’s targets was limited to 12 percentage points to avoid rendering the increase, for some Member States, much higher than the increase in the collective target (11 percentage points). To maintain the overall EU wide ambition of the ESR, targets were increased by 0.7 percentage points for Member States whose updated targets were not more ambitious than their cost-effective projections and for Member States that had already contributed to a target adjustment or that would otherwise have targets falling outside the target range of -10% to -50%.

In addition to EU Member States, Iceland and Norway have agreed to implement the Effort Sharing Regulation and commit to binding 2030 emission reduction targets. They apply the same rules and have the same obligations and flexibilities as EU Member States, to allow for a fair and cost-efficient achievement of targets. Moreover, they also adopted national plans describing their existing and planned policies and measures and how they intend to meet the requirements of the Effort Sharing and LULUCF (Land Use, Land Use Change and Forestry) Regulations. The 2030 targets of Iceland and Norway have not yet been updated to match the increased ambition set in the 2023 revision of the ESR.

Annual emission limits

In addition to establishing targets for the reduction of emissions in the Member States by 2030, the Effort Sharing Regulation also defines annual emission limits for each year, from 2021 to 2030. For that purpose, Member States are provided with a set number of emission allocations (each corresponding to a tonne of CO₂ equivalent) for each of the years in the 2021-2030 period.  The number of allocations decreases every year.

The annual emission limits per Member State are calculated based on a trajectory system (leading to the 2030 emission reduction targets) and a set of adjustments established under Articles 4 and 10 of the Effort Sharing Regulation.

To address challenges that lower-income Member States might face, an additional adjustment of 41 million tonnes was made for 2021.

The Commission Implementing Decision (EU) 2020/2126 of 16 December 2020 provides the result of such calculations, assigning to each Member State the corresponding number of emission allocations, often named AEAs (annual emission allocations), for each year from 2021 to 2030.

The 2023 revision of the Effort Sharing Regulation amended the 2030 targets and the system of trajectories leading to them. Therefore, in 2023, the Commission amended the Commission Implementing Decision (EU) 2020/2126 to update the number of AEAs assigned to Member States in the years 2023-2025. The 2023 revision of the Regulation maintained the emission limits for the years 2021 and 2022, and therefore the number of AEAs assigned to each Member State in those two years remains the same as in 2020. The annual emissions allocations for the years 2026-2030 will be determined in 2026 after a comprehensive review of the emission data.

The Regulation also has a safety reserve of a maximum of 105 million tonnes. The reserve is subject to the collective achievement of the EU's target of a 40% reduction by 2030. Member States struggling to meet their national targets may obtain, through the safety reserve, access to a limited number of additional allocations to cover their excess of emissions. Such additional allocations will only be available in 2032, after having carried out the last compliance check, and as a last resort mechanism, to be used under strict conditions, such as having overachieved emission targets between 2013 and 2020.

Achieving the targets in a fair and cost-effective manner

The Regulation provides Member States with a set of flexibilities.

Flexibility to access allowances from the EU ETS

The Effort Sharing Regulation (ESR) allows nine Member States to use a limited amount of EU ETS allowances to offset emissions in Effort Sharing sectors. This applies to Member States that:

• Have national reduction targets significantly higher than the EU average and their cost-effective reduction potential, or
• Did not allocate free EU ETS allowances to industrial installations in 2013.

This flexibility, commonly referred to as the “ETS flexibility”, allows Member States to:

• Cancel a certain number of EU ETS allowances that would otherwise be auctioned;
• Receive an equivalent amount of ESR annual emission allocations (in tonnes of CO₂ equivalent);
• Use these allocation to comply with their ESR obligations.

Please note that this flexibility was not available under the Effort Sharing Decision for the 2013-2020 period.

The following Member States can use the ETS flexibility:

• Belgium
• Denmark
• Ireland
• Luxembourg
• Malta
• The Netherlands
• Austria
• Finland
• Sweden

Additionally, two non-EU countries that have agreed to implement the ESR are also eligible:

• Iceland
• Norway

Each eligible country has a maximum limit on the amount of ETS flexibility they can use. The limit is set as a percentage of the 2005 Effort Sharing emissions of each country. This percentage determines the maximum amount of EU ETS allowances that can be cancelled annually in the 2021-2030 period. The limits are as follows:

• Ireland and Luxembourg: 4%
• Malta: 2% for the period 2021-2024 and 7% for the period 2025-2030
• All other EU beneficiaries (Belgium, Denmark, Netherlands, Austria, Finland, and Sweden): 2%
• Iceland: 4%
• Norway: 2%

Eligible countries are free to decide, within the above limits, which percentage should be applied to its 2005 Effort Sharing emissions. This is to determine the quantity of EU ETS allowances that should be cancelled annually.

The amount of ETS flexibility that Member States can use is set out in the Commission Implementing Decision (EU) 2020/2126, which is updated whenever necessary to reflect any changes in the amounts of ETS flexibility that Member States intend to use.

The following table displays the percentages notified by Member States, as well as the resulting maximum quantity of annual emission allocations (AEAs) that a Member State is allowed to use in the 2021-2030 period for ESR compliance.

* In 2027 Member States may revise the percentage applicable to the years 2028-2030

** Subject to amendment if Member States revise in 2027 the percentages applicable to the years 2028-2030

Access credits from the land use sector

To incentivise additional action in the land use sector, Member States can, in case of need, use up to 131 million credits (collectively) over the 2021-2025 period. The same applies in the 2026-2030 period.

All Member States are eligible to make use of this flexibility if needed to achieve their target. The flexibility is higher for Member States with a larger share of emissions from agriculture. This recognises that there is a lower mitigation potential for emissions from the agriculture sector.

Banking, borrowing, buying and selling

In years when reported emissions are lower than the attributed annual emission allocations, Member States can reserve surpluses and use them in later years. For high cumulative surpluses, banking limits have been added.

In years where emissions are higher than the annual limit, Member States can borrow a limited number of allocations from the following year, thereby balancing the difference within the set timeframe (2021-2030).

This gives Member States the flexibility to deal with annual fluctuations in GHG emissions due to weather, economic or other unforeseeable conditions.

Member States can also buy from and sell allocations to other Member States to ensure cost-effectiveness. This enables Member States to access emissions reductions where they are cheaper. Member States selling allocations should use such revenues to tackle climate change.

Project-based mechanisms within the EU are a possible way to underpin these transfers.

Transparency: The Union Registry 

To ensure the accurate accounting of the annual emission allocations held by Member States and of the use of the different flexibilities, the Commission is developing an ESR registry that will be integrated into the Union Registry (used for accounting allowances issued under the EU Emissions Trading System/ EU ETS).

Reporting and following up progress

The Commission evaluates and reports annually towards achieving the targets (see ‘Progress on climate action’).

If a Member State is not on track, it will be required to submit to the Commission a correction action plan with, among others, additional actions, an implementation timetable, and an assessment of the planned GHG emission reductions.

A comprehensive review of Member States' emissions reports and a more formal compliance check is organised every five years, ensuring alignment with the five-year review cycle set out in the Paris Agreement.

Where, after the use of the available flexibilities, a Member State exceeds its annual limit in any year, the quantity of emissions in excess is multiplied by a factor of 1.08 and the result is added to the emissions of the subsequent year.

Stakeholder input

Stakeholders were involved at various stages in the development of the Regulation and its 2023 revision, e.g. through:

• 27/04/2021 - Public consultation on the preparation of the proposal that led to the 2023 revision of the Effort Sharing Regulation
• Written stakeholder consultation on the Green Paper: A 2030 climate & energy framework
• 19/06/2015 - Stakeholder consultation on the preparation of the proposal that led to the adoption, in 2018, of the Effort Sharing Regulation. The results are summarised in Annex 8.2 of the Impact assessment.

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