In 2023, the EU ETS was marked by a historical 16.5% reduction in emissions from stationary installations driven by the power sector. Renewable electricity production increased substantially (primarily wind and solar), and the trend of gas replacing coal in power generation was resumed. With this development, ETS emissions from installations are around 47.6% below 2005 levels and well on track to achieve the 2030 target of -62%. On the other hand, in 2023 intra-European aviation emissions increased by around 10% above 2022 levels, reflecting the increasing activity levels of the sector.
These emission reductions in the EU ETS in 2023 have been facilitated by a sustained and robust carbon price signal. The Market Stability Reserve has continued to remove surplus allowances and to invalidate allowances in the reserve’s holdings. In the latest assessment of the European Securities and Markets Authority (ESMA), the EU carbon market remained stable in 2023 and continued to operate in line with market fundamentals. ESMA also considered that most of its 2022 recommendations to enhance the transparency of the carbon market have been implemented. These emission trends confirm the effectiveness and efficiency of the EU ETS as one of the main policy incentives for decarbonising the European economy.
EU ETS revenue remains an important source of funding for the climate transition, with EUR 43.6 billion raised in 2023 and distributed primarily to national budgets of the Member States to tackle climate change, as well as to the ETS Innovation Fund, the ETS Modernisation Fund and the Resilience and Recovery Facility for the REPowerEU plan. Total revenue raised by the EU ETS to date exceeds EUR 200 billion. A detailed overview of Member States’ reporting on the use of their ETS revenue in 2023 can be found in the 2024 EU Climate Action Progress Report.
The EU ETS was revised in 2023, as part of the Fit for 55 legislative package, to support EU’s efforts to reduce emissions and to transform the European economy in line with European Climate Law targets and European Green Deal objectives. The revision is now fully in force and its implementation is under way. The report adopted today recaps the legislative work completed so far to implement the ETS revision.
The 2024 cap on emissions was reduced by 90 million allowances, while the scope of the system now extends to the EU’s fair share of emissions from maritime transport. The system’s application to aviation has also been strengthened - in 2024, 25% fewer free allowances are allocated to aircraft operators and from 2025, new rules for the monitoring and reporting of non-CO2 effects of aviation will start applying. Monitoring and reporting rules have also been established for the new separate Emissions Trading System, ETS2, which will help advance emission reductions from buildings, road transport and additional sectors.
In parallel with the adoption of the Carbon Market Report, the European Commission also communicates on the volumes of allowances auctioned for the REPowerEU plan to help tackle climate change, advance the clean energy transition and address energy poverty. According to Article 10(6) of the Auctioning Regulation, 86 685 000 and 58 000 000 allowances will be auctioned for REPowerEU in 2025 and 2026 respectively. There is no plan to adjust the REPowerEU volumes planned for the period until September 2025. A ny decision to adjust the REPowerEU volumes for the period September 2025 to August 2026 will depend on the price evolution and will be communicated in July 2025.
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Details
- Publication date
- 19 November 2024
- Author
- Directorate-General for Climate Action