Emissions trading: slight decrease in emissions in 2015

Emissions of greenhouse gases from installations participating in the EU Emissions Trading System (EU ETS) are estimated to have decreased by just under 0.4% last year, according to the information recorded in the Union Registry.

The surplus of emission allowances that has built up in the system since 2009 was considerably reduced last year as a result of "back-loading", which postponed the auctioning of 300 million allowances from 2015 to 2019-2020, combined with stable emissions.

EU Climate Action and Energy Commissioner Miguel Arias Cañete said: "The good news is that the EU ETS emissions dropped slightly last year, which confirms the decreasing trend over the last five years. Also, 2015 marks the first year in which the surplus shrank considerably on the European carbon market – thanks to the back-loading of allowances. This shows that our efforts to address the serious market imbalance start to bear fruit. But back-loading is just the beginning. The Market Stability Reserve will need to complete the work."

The Market Stability Reserve will start operating in less than 32 months as of January 2019 and will address the current surplus of allowances. In May 2017, the Commission will publish the first surplus indicator which will be used to determine how many allowances will be fed into the reserve annually.

2015 emissions slight decline

The EU ETS covers more than 11 000 power plants and manufacturing installations in the 28 EU Member States, Iceland, Norway and Liechtenstein, as well as emissions from airlines flying between European airports.

Verified emissions of greenhouse gases from stationary installations amounted to 1800 million tonnes of CO₂-equivalent in 2015. These emissions were about 0.37% below the 2014 level [1].

Surplus decrease

The surplus of emission allowances in the EU ETS was reduced by more than 300 million allowances to around 1.78 billion, reflecting the implementation of back-loading combined with stable emissions. Without back-loading, the surplus would have been almost 40% higher at the end of 2015.

Two further changes contributed to the reduced supply of allowances: Firstly, more than 200 million fewer international credits were exchanged for ETS allowances in 2015 compared to the previous year, reflecting the 2014 deadline for the exchange of such credits from the first trading period of the Kyoto Protocol. Secondly, no allowances were monetised for the NER 300 funding programme for low-carbon technology demonstration projects in 2015, compared to 100 million allowances in 2014.

Continued high level of compliance

Companies' level of compliance with the EU ETS rules was again high. Less than 1% of the installations which reported emissions for 2015 did not surrender allowances covering all their emissions by the deadline of 30 April 2016. These installations are typically small and together account for approximately 0.5% of emissions covered by the EU ETS. A small number of installations − accounting for less than 0.2% of emissions in the previous year − did not report their 2015 emissions by 30 April 2016, according to registry data.

Airlines' 2015 emissions

Under the EU ETS Directive, all commercial and non-commercial aircraft operators with significant emissions are accountable for their emissions from flights within the European Economic Area (EEA) [2] in the period 2013-2016. Airlines were required to report their 2015 emissions by 30 March 2016 and surrender corresponding allowances by 30 April 2016. Verified emissions from flights between airports located in the EEA amounted to 56.9 million tonnes of CO₂ in 2015, an increase of 3.6% compared to 54.9 million tonnes in 2014.

The level of compliance was very high: airlines responsible for more than 99% of aviation emissions covered by the EU ETS complied with the legislation in 2015. This includes more than 100 commercial aircraft operators which are based outside the EU, but operate flights within the EEA.

Exchanges of international credits

The total number of international credits exchanged into EU ETS allowances since the exchange function became operational in March 2014 amounts to 410.62 million.

Of these, 218.09 million were Certified Emission Reductions (CERs) and 192.53 million were Emission Reduction Units (ERUs). The CERs and ERUs exchanged came from projects taking place in a limited number of countries, with over 75% of CERs originating from China and almost 77% of ERUs exchanged coming from projects in Ukraine.

Since 31 March 2015, credits issued in respect of emission reductions occurring during the first commitment period of the Kyoto Protocol (so-called "CP1 credits") can no longer be exchanged in the EU ETS. The total number of CP1 credits exchanged by 31 March 2015 was 385.35 million.

A total of 24.8 million credits issued under the second commitment period of the Kyoto Protocol ("CP2 credits") have been exchanged since March 2014. These were Certified Emission Reductions (CERs). More information on the credits exchanged by 30 April 2016 is available in the annex.

Background

Under the EU ETS, installations are required to submit their verified emissions data for each year to Member State registries. For 2015, this data became publicly available on the European Union Transaction Log (EUTL) on 1 April 2016. The EUTL displays compliance data from 2 May 2016, with information on whether installations have complied with their obligation to surrender an amount of allowances equal to the previous year's verified emissions.

The third trading period of the EU ETS began on 1 January 2013 and runs for eight years until 31 December 2020. The legislation reforming the EU ETS, laying down revised rules until 2020 and beyond, was adopted as part of the EU climate and energy package on 23 April 2009 (see IP/09/628).

In May 2015, the European Parliament and the Council reached a political agreement to establish a Market Stability Reserve in 2018 to address the surplus of emission allowances that has built up and improve the EU ETS's resilience to shocks by adjusting the supply of allowances to be auctioned (see IP/14/54).

For more information:

• European Union Transaction Log
• Union Registry and Member State registries
• Revised ETS and Frequently Asked Questions
• Aviation

Annex: Exchanges of international credits

[1] Total emissions are compared for installations having reported emissions both in 2014 and 2015.

[2] The limitation of the EU ETS to flights within the EEA between 2013 and 2016 was agreed in Regulation No.421/2014, pending the agreement to be reached in 2016 in the International Civil Aviation Organization (ICAO) on a single global market-based measure, to be implemented from 2020.