The EU Emissions Trading System in 2019 : trends and projections.
Date: 2019-11-06
Institutions: European Environment Agency
Subjects: EU environmental policy, air quality, atmospheric pollutant, emission allowance, emission trading, environmental protection, greenhouse gas, reduction of gas emissions

Climate change mitigation

Trends and projections in Europe 2019

The EU Emissions Trading
System in 2019: trends and
projections

The European Union (EU) Emissions Trading System (ETS) governs about 40 % of total EU

greenhouse gas emissions. It sets a cap on emissions from industrial activities (e.g. power and

heat production, cement production, iron and steel production and oil refining), as well as aviation.

Based on the latest available data, this briefing provides an overview of past and projected

emission trends under the EU ETS, and of the balance between the supply of and demand for

emission allowances on the EU carbon market.

Key messages

Total ETS emissions from stationary installations declined by 4.1 % between 2017 and 2018.

Emissions from combustion installations declined by 5.9 %, mainly due to the phasing out of coal

use in power plants, while those from other industrial installations decreased by 0.7 %. ETS

emissions from airline operators continued to increase, up 4.0 % in 2018 relative to 2017, reflecting

mainly the increasing demand for air travel.

Under measures currently in place, Member States, Iceland and Norway project that ETS

emissions will continue to decrease, albeit slower than the historical rate. The overall 36 %

projected reduction by 2030, compared with 2005 levels, is not yet in line with the 43 % reduction

objective. Ten countries project increasing ETS emissions until 2030.

Despite fewer EU emission allowances (EUAs) being auctioned in 2018 than in 2017, revenue

from auctions increased from EUR 5.5 billion to EUR 14.1 billion. This increase reflects the increase

in the average allowance price, from EUR 5.8 per tonne in 2017 to EUR 15.5 per tonne in 2018.

In 2018, the surplus of emission allowances was the same as in 2017, amounting to around 1.65

billion. If the net demand for allowances from aviation is also taken into account, then the number of

allowances available to operators was lower in 2018 compared to the previous year. About 397

million allowances are expected to enter the Market Stability Reserve (MSR) between September

2019 and August 2020. According to EEA estimates based on the latest Member State projections,

with measures currently in place, the total number of allowances in circulation (TNAC) might not fall

below the lower MSR threshold of 400 million before 2030.

Trends and projections in Europe > Trends and projections in Europe 2019 > The EU Emissions Trading System in 2019: trends and
projections

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Climate change mitigation

This briefing is based on data and information available as of June 2019: verified emissions and
compliance by operators under the EU ETS for the years up until 2018, extracted from the EU
Transaction Log of the European Commission and projections of national ETS emissions until
2030, reported by EU Member States, Iceland and Norway to the European Environment Agency.

A more detailed report on "Trends and projections: the EU Emissions Trading System in numbers
in 2019" is currently under preparation by the European Topic Centre on Climate change Mitigation
and Energy (ETC/CME) and will be available as of mid-November.

Emissions

Historic trends

Total ETS emissions from stationary installations declined by 4.1 % between 2017 and 2018. Over
a longer period, total ETS emissions from stationary installations have declined by around 29 %
between 2005 and 2018 (Figure 1).

[1]

 remain the main source of emissions in the EU

Combustion installations (mainly power plants)
ETS (65 % of total ETS emissions in 2018). This is also the sector where the main emission
reductions have taken place (5.9 % reduction in 2018 compared to the previous year). This decline
partly reflects the phasing out of coal use in several Member States. In 2018, the 30 highest
emitting power plants alone emitted 329.2 Mt CO , 30 % of the total EU combustion emissions in
2
that year. The top emitting power plants are located mainly in Poland and Germany, and burn
lignite fuel.

[2]

The ETS emissions of other industrial installations decreased by an average of 0.7 % in 2018
compared with 2017 . This annual change in industrial ETS emissions, however, varied by
industrial sector, reflecting changes in production output, rates of energy efficiency and the extent
to which biomass, including waste from biological origin, were used as energy sources in
production processes.

The ETS emissions from the aviation sector continued to increase year on year throughout the
third trading period , and in 2018 were 4.0 % higher than in the previous year. This primarily
reflects the increasing demand for air travel.

[3]

Figure 1 - EU ETS emissions by activity type

Trends and projections in Europe > Trends and projections in Europe 2019 > The EU Emissions Trading System in 2019: trends and
projections

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Climate change mitigation

Figure 1 - EU ETS emissions by activity type

10 Aviation

Estimate to reflect
current scope

21-99 All industrial
installations

20 Combustion of
fuels

5555
590590

5757
591591

6161
584584

6464
591591

6767
587587

1,224 1,212
1,224
1,212

1,166 1,164
1,166
1,164

1,095
1,095

122122
510510

113113
537537

107107
533533

8484
103103
507507

5353
588588

1,370 1,402
1,370

1,402 1,372

1,372 1,360

1,360 1,320
1,320

3,000

2,500

355355

339339

571571

581581

234234

620620

140140

626626

1,455
1,443 1,455
1,443

1,545
1,545

1,493
1,493

q
e
₂-
O
C

t

M

2,000

1,500

1,000

500

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Data sources:

a. European Commission. European Union Emissions Trading System (EU ETS) data from EUTL
b. EEA. EEA greenhouse gas data viewer

Explore chart interactively

Source: EEA (2019a).

Projected trends

Trends and projections in Europe > Trends and projections in Europe 2019 > The EU Emissions Trading System in 2019: trends and
projections

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Climate change mitigation

Projected trends

While total stationary ETS emissions decreased by 29 % between 2005 and 2018 , the rate of
reduction is projected to slow, according to national projections reported by Member States,
Iceland and Norway in 2019 under EU legislation. ETS stationary emissions are projected to
decline by 7 % between 2018 and 2030, with existing measures in place. This means a decrease
of 36 % in 2030 compared to 2005. With additional measures, emissions are projected to be
reduced by an additional 5 %. So even with additional measures, emission reductions will amount
to approximately 41 %, slightly less than the 43 % reduction target.

[4]

Emissions are expected to decline in 20 countries between 2018 and 2030 with existing measures,
with the highest relative reductions of 40 % forecast in Estonia (Figure 2). However, ten countries
still anticipate increases in their ETS emissions between 2018 and 2030 with existing measures.
The reasons for these increases include:

the planned phase out of nuclear energy, to be replaced by new fossil production

plants (e.g. Belgium);

the increase in carbon intensive energy production (e.g. Ireland, Denmark, Malta);

the increase in emissions from industrial processes (e.g. Ireland, Lithuania, Poland,

Romania).

Some of these countries are planning to adopt and implement additional measures to reduce
emissions. Additional policies and measures offering greater reductions are:

the growth and more widespread use of renewable energies (e.g. Ireland);

the phase out of coal-fired power plants (e.g. France, Spain);

the phase out of direct oil shale combustion and the increase in the efficiency of oil

shale combustion plants for electricity generation (Estonia);

the increase in biomass co-firing (e.g. Ireland).

Figure 2 - Historic and projected changes in ETS emissions relative to 2005 levels

Trends and projections in Europe > Trends and projections in Europe 2019 > The EU Emissions Trading System in 2019: trends and
projections

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Climate change mitigation

Figure 2 - Historic and projected changes in ETS emissions relative to 2005 levels

EU-28
EU-28

2005-2018
change

2018-2030
change with
existing
measures

2018-2030
change with
additional
measures

Chart

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20

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-40

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-100

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Icela

Note: Projections of EU Member States, Iceland and Norway, compiled by ETC/CME

Data sources:

a. European Commission. European Union Emissions Trading System (EU ETS) data from EUTL
b. European Commission. Publication of the total number of allowances in circulation in 2018 for the
purposes of the Market Stability Reserve under the EU Emissions Trading System established by Directive
2003/87/EC.

Explore chart interactively

Balance of allowances

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projections

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Balance of allowances

According to the European Commission (EC, 2019), the total number of allowances in circulation
(TNAC) amounted to 1.65 billion in 2018. The overall supply of allowances in the EU ETS in 2018
remained lower than the overall annual demand, if the net demand for allowances from the aviation
sector is also taken into account. This was due, in part, to fewer allowances being allocated for free
(reflecting the planned annual reduction in the ETS cap) and the limited use of international offsets
that installations can use for compliance. Furthermore, fewer allowances were auctioned in 2018
than in 2017. This is partly due to the fact that Germany sold fewer allowances via auctions than
expected.

Despite the lower number, revenues from the auctioning of EU allowances increased from
EUR 5.5 billion in 2017 to EUR 14.1 billion in 2018, reflecting the increase in the allowance price
(i.e. the average allowance price increased from EUR 5.8 per tonne in 2017 to EUR 15.5 per tonne
in 2018)

[5]
.

To ensure the orderly functioning of the market and address the structural supply-demand
imbalance, the Market Stability Reserve (MSR) began operations in January 2019. The MSR
places a proportion of the total allowances (holdings) of the market into a reserve when the number
of allowances is exceeding the demand above a certain threshold. In May 2019, the European
Commission announced that a total of 397 178 358 allowances will be placed in the MSR between
1 September 2019 and 31 August 2020 (EC, 2019).

The EEA prepares estimates based on national projections of ETS emissions reported by Member
States. According to these EEA estimates, the TNAC will decrease, as a consequence of
allowances moving into the reserve over the coming years (Figure 3). From 2023 onwards, certain
holdings in the reserve will lose their validity . As EU ETS emissions are projected  to be higher
than the cap from 2026 onwards, the demand for allowances will contribute to further reducing the
TNAC. With measures currently in place, the EEA also estimates that the TNAC might not fall
below the lower MSR threshold of 400 million before 2030.

[6]

[7]

Figure 3 - EEA outlook of the supply and demand of allowances until 2030

Trends and projections in Europe > Trends and projections in Europe 2019 > The EU Emissions Trading System in 2019: trends and
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Climate change mitigation

Figure 3 - EEA outlook of the supply and demand of allowances until 2030

Notes: For the period from 2019 to 2030, the TNAC is an estimate based on Member States projections. New units entering the
market include free allocation, allowances auctioned and sold, and the use of international credits.

Sources: Authors calculation based on the projections of EU Member States, Iceland and Norway, which were compiled by the
ETC/CME and the EEA (2019b). Download the figure here.

Footnotes and references

EC, 2010,  Guidance note on interpretation of Annex I of the EU ETS Directive (excl. aviation
activities), European Commission, accessed 10 November 2018.

EC, 2019, Publication of the total number of allowances in circulation in 2018 for the purposes of
the Market Stability Reserve under the EU Emissions Trading System established by Directive
2003/87/EC, European Commission.

EEA, 2019a, EEA greenhouse gas data viewer, European Environment Agency, accessed 9 May
2019.

Trends and projections in Europe > Trends and projections in Europe 2019 > The EU Emissions Trading System in 2019: trends and
projections

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Climate change mitigation

EEA - European Environment Agency (2019b): ETC/CME. Estimate of 2005-2012 emissions for
stationary installations to reflect the current scope (2013-2020) of the EU ETS, Eionet Report -
ETC/CME 2019/1 April 2019. In collaboration with Graichen, V.; Cludius, J. and Gores, S. (Eionet
Report-ETC/CME, 1/2019). European Environment Agency. Graichen, V.; Cludius, J. and Gores,
S. (ed.), 4/2019. Online available at https://www.eionet.europa.eu/etcs/etc-cme/products/etc-cme-
reports/estimate-of-2005-2012-emissions-for-stationary-installations-to-reflect-the-current-scope-
2013-2020-of-the-eu-ets, last accessed on 16 Aug 2019.

EEA - European Environment Agency (ed.) (2019c): EEA - European Environment Agency. EU
Emissions Trading System (ETS) data viewer, 2019. Online available at
https://www.eea.europa.eu/data-and-maps/dashboards/emissions-trading-viewer-1, last accessed
on 28 Oct 2019.

[1]  Combustion installations refers to any oxidation of fuels, regardless of the way in which heat,
electricity or mechanical energy produced by this process are used, and any other directly
associated activities including waste gas scrubbing (EC, 2010).

[2]  This is the average decrease by ETS activity codes 21 to 99, which cover specific industries. It
does not include the industrial installations with no specific ETS activity, which are covered under
combustion (ETS activity code 20).

[3] The third trading period runs from 2013 to 2020.

[4] The emission reductions between 2005 and 2018 are estimated based on the current scope of
the EU ETS in the third trading period EEA (2019b).

[5] The average EUA price for a given year is calculated by taking EEX prices and supplementing
this with ICE prices for days only where the EEX price is not available.

[6] A small intermediate decrease is also anticipated in 2021, when the new entrant reserve for the
period 2021-2030 is taken out of the MSR.

[7] With existing measures.

Identifiers

Briefing no. 8/2019

Title: The EU Emissions Trading System in 2019: trends and projections 

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Published on 31 Oct 2019

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