REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Report on the functioning of the European carbon market
Date: 2020-11-18
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Emissions Trading Scheme, EU emission allowance, EU environmental policy, air transport, carbon, clean technology, environmental monitoring, greenhouse gas, market supervision, reduction of gas emissions

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 18.11.2020  COM(2020) 740 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Report on the functioning of the European carbon market  
 
 
Table of Contents 
List of acronyms and abbreviations ........................................................................................... 2 

1. INTRODUCTION ................................................................................................................. 4 

2. EU ETS INFRASTRUCTURE .............................................................................................. 6 

2.2 Union Registry and the European Union Transaction Log (EUTL) .................................... 8 

3. FUNCTIONING OF THE CARBON MARKET IN 2019 .................................................... 9 

3.1. Supply: allowances put in circulation ........................................................................... 10 

3.1.1. Cap .......................................................................................................................... 10 

3.1.2. Issued allowances ................................................................................................... 13 

3.1.2.1.Free allocation ................................................................................................... 13 

3.1.2.2. Auctioning of allowances ................................................................................ 15 

3.1.2.3. Derogation from full auctioning for electricity and heat production ............... 19 

3.1.2.4. NER 300 programme ....................................................................................... 23 

3.1.2.5. The Innovation Fund ........................................................................................ 24 

3.1.2.6. The Modernisation Fund .................................................................................. 25 

3.1.2.7. Compensation of indirect carbon costs ............................................................ 26 

3.1.3. International credits ................................................................................................ 28 

3.2. Demand: allowances taken out of circulation ............................................................... 29 

3.3. Balancing supply and demand ....................................................................................... 30 

4. AVIATION .......................................................................................................................... 33 

5. MARKET OVERSIGHT ..................................................................................................... 36 

6. MONITORING, REPORTING AND VERIFICATION OF EMISSIONS ........................ 38 

7. OVERVIEW OF ADMINISTRATIVE ARRANGEMENTS  ............................................ 40 

8. COMPLIANCE AND ENFORCEMENT  .......................................................................... 41 

9. CONCLUSIONS AND OUTLOOK .................................................................................... 43 

ANNEX.................................................................................................................................... 44 

1 

 
 
 
 
List of acronyms and abbreviations 

AVR 

CA 

CCS 

CCU 

CDM   

CERs   

Accreditation and Verification Regulation 

Competent Authority 

Carbon Capture and Storage 

Carbon Capture and Utilisation 

Clean Development Mechanism 

Certified Emission Reductions 

CORSIA 

Carbon Offsetting and Reduction Scheme for International Aviation 

CSCF   

Cross-Sectional Correction Factor 

EA 

EEA 

EEX 

EIB 

ERUs   

ESMA  

European Cooperation for Accreditation 

European Economic Area 

European Energy Exchange 

European Investment Bank 

Emission Reduction Units 

European Securities and Markets Authority 

EU ETS 

European Union Emissions Trading System 

EUTL   

GHG    

ICAO   

ICE 

European Union Transaction Log 

Greenhouse Gas 

International Civil Aviation Organization 

InterContinental Exchange Futures Europe  

InnovFin EDP InnovFin Energy Demonstration Projects  

JI 

Joint Implementation 

MAR   

Market Abuse Regulation 

MiFID2 

Directive on Markets in Financial Instruments 

MiFIR  

Regulation on Markets in Financial Instruments 

MRR 

MRVA 

MSR     

NAB 

NER 

OTC 

Monitoring and Reporting Regulation 

Monitoring, Reporting, Verification and Accreditation 

Market Stability Reserve 

National Accreditation Body 

New Entrants Reserve 

Over-the-counter 

2 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PFCs 

RES 

SARPs  

TNAC  

Perfluorocarbons 

Renewable Energy Sources 

CORSIA Standards and Recommended Practices 

Total Number of Allowances in Circulation 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1. INTRODUCTION 

The  European  Emissions  Trading  System  (EU  ETS)  has  been  the  cornerstone  of  the  EU's 
strategy  for  reducing  greenhouse  gas  (GHG)  emissions  from  industry,  electricity  and  heat 
production  since  2005.  It  contributes  significantly  to  achieving  the  overall  EU  target  of 
cutting  GHG  emissions  by  20%  from  1990  levels  by  2020,  which  the  EU  is  on  track  to 
surpass.  

This  Report  on  the  functioning  of  the  European  carbon  market  is  presented  in  accordance 
with  the  requirements  of  Articles  10(5)  and  21(2)  of  Directive  2003/87/EC1  (EU  ETS 
Directive).  The  objective  of  the  report  is  to  provide  a  snapshot  of  developments  in  the 
European  carbon  market  on  an  annual  basis.  The  report  covers  the  year  2019,  but  also 
presents developments in the first half of 2020. 

Looking  towards  the  next  decade,  the  Commission’s  Communication  on  the  2030  Climate 
Target Plan2 proposed to increase the EU’s 2030 GHG emissions reductions target from 40% 
to  at  least  55%  compared  with  1990  levels.  To  deliver  on  this  higher  ambition,  the 
Commission will, by June 2021, review and propose to revise where necessary, all relevant 
climate-related  policies.  As  part  of  the  broader  package  of  legislation  under  the  European 
Green Deal3, the EU ETS will also be revised, including a possible extension of the system to 
new sectors.  

Following the revision of the ETS Directive4, the work on implementation for phase 45 has 
been  active  and  is  progressing  swiftly.  Over  the  past  year,  implementing  legislation  on  the 
adjustment  of  free  allocation  based  on  activity  level  changes6  and  on  the  operation  of  the 
Modernisation  Fund7  has  been  adopted,  and  the  second  revision  of  the  Auctioning 

1 Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a system for 
greenhouse gas emission allowance trading within the Union and amending Council Directive 96/61/EC, OJ L 275, 
25.10.2003, p. 32. 
2 COM(2020) 562 final– Communication from the Commission to the European Parliament, the Council, the European 
Economic and Social Committee and the Committee of the Regions – Stepping up Europe’s 2030 climate ambition, 
Investing in a climate-neutral future for the benefit of our people – The 2030 Climate Target Paln 
3 COM(2019) 640 final – Communication from the Commission to the European Parliament, the European Council, the 
Council, the European Economic and Social Committee and the Committee of the Regions – The European Green Deal 
4 Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 
2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814, OJ L 
76, 19.03.2018, p.3 
5 The EU ETS is regulated in phases. Phase 3 covers the period 2013-2020, while phase 4 covers the period  2021-2030. 
6 Commission Implementing regulation (EU) 2019/1842 of 31 October 2019 laying down rules for the application of 
Directive 2003/87/EC of the European Parliament and of the Council as regards further arrangements for the adjustments to 
free allocation of emission allowances due to activity level changes, OJ L 282/, 4.11.2019, p. 20 
7 Commission Implementing Regulation (EU) 2020/1001 of 9 July 2020 laying down detailed rules for the application of 
Directive 2003/87/EC of the European Parliament and of the Council as regards the operation of the Modernisation Fund 
supporting investments to modernise the energy systems and to improve energy efficiency of certain Member States, OJ L 
221, 10.7.2020, p. 107 

4 

 
 
 
 
                                                            
Regulation8  to  implement  phase  4  requirements  has  been  completed  (see  chapters  3.1.2.1, 
3.1.2.2,  and  3.1.2.6).  The  remaining  implementing  provisions  are  currently  being  finalised, 
with the aim of having them adopted before January 2021. 

Since the publication of the last carbon market report9, the Market Stability Reserve surplus 
indicator was published for the fourth time, showing that in 2019 the  surplus of allowances 
decreased  from  1.65  billion  in  2018  to  around  1.39  billion  allowances10.  Based  on  the 
indicator and the revised EU ETS legislation, the auction supply in 2020 will be reduced by 
around 375 million allowances (nearly 35%) (see chapter 3.3).   

In 2019, there was a significant decrease of emissions from stationary installations of 9.1% 
compared to 2018 (see chapter 3.2). The decrease was mainly driven by the the power sector, 
where  emissions  fell  by close  to  15%  as  a  result  of  coal  being  replaced  by  electricity  from 
renewables and gas-fired power production. With this latest decrease, overall emissions from 
stationary installations since the start of phase 3 of the EU ETS have decreased by close to 
20%.  In  the  aviation  sector,  emissions  continued  growing,  marking  a  slight  increse  of  1%  
compared to 2018 (see chapter 4).  

There were also important ETS–related political developments such as the entry into force of 
the agreement on the linking of the EU ETS with Switzerland’s ETS on 1 January 2020, and 
the  lifting  of  the  suspension  of  UK  auctioning  and  free  allocation  processes  following  the 
entry into force of the Agreement on the withdrawal of the United Kingdom from the EU (see 
chapter 2.2). 

Last, but not least, the COVID-19 crisis led to a significant short-term dip in the carbon price 
in March/April 2020. In spite of that, the carbon price signal remained stable at around EUR 
2411  on  average  between  January  2019  and  the  end  of  June  2020.  Revenues  from  the 
auctioning of ETS allowances exceeded EUR 14 billion in 2019 alone, and EUR 7.9 billion 
for the first six months of 2020. Based on data submitted by Member States, over the course 
of  2019,  a  total  of  77%  of  these  revenues  were  spent  (or  were  planned  for  spending)  on 
specified climate and energy related purposes (see chapter 3.1.2.2). 

Unless otherwise indicated, data used for this report were the ones publicly available and at 
the disposal of the Commission by June 202012. General and descriptive information on the 
EU ETS is included in boxes throughout the report. 

8 Commission Delegated Regulation (EU) 2019/1868 of 28 August 2019 amending Regulation (EU) No 1031/2010 to align 
the auctioning of allowances with the EU ETS rules for the period 2021 to 2030 and with the classification of allowances as 
financial instruments pursuant to Directive 2014/65/EU of the European Parliament and of the Council, OJ L 289, 8.11.2019, 
p. 9 
9 The 2019 carbon market report can be found here: https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52019DC0557R(01)  
10 C(2020) 2835 final, https://ec.europa.eu/clima/sites/clima/files/ets/reform/docs/c_2020_2835_en.pdf  
11 Source: ICE 
12 The cut-off date used was 30 June 2020. 

5 

 
 
 
 
                                                            
2. EU ETS INFRASTRUCTURE 

2.1 Coverage of activities, installations and aircraft operators 

The  EU  ETS  currently  operates  in  the  27  Member  States  of  the  EU,  Iceland, 
Liechtenstein and Norway, as well as in the United Kingdom until the end of 2020. As of 
1 January 2020, the EU ETS is also linked to the Swiss carbon market (see chapter 2.2). 
From 2021, besides the EU and EEA/EFTA countries, the EU ETS will cover electricity 
generating  installations  in  Northern  Ireland.  It  regulates  emissions  from  nearly  11  000 
power  plants  and  manufacturing  installations  as  well  as  around  600  aircraft  operators 
flying from/to EEA's airports. It covers around 38% of the EU's GHG emissions. 

In phase 3 of the EU ETS (2013-2020)*, the sectors with stationary installations regulated 
by  the  EU  ETS  are  energy  intensive  industries,  including  power  stations  and  other 
combustion  plants  with  >20MW  thermal  rated  input  (except  hazardous  or  municipal 
waste installations), oil refineries, coke ovens, iron and steel, cement clinker, glass, lime, 
bricks,  ceramics,  pulp,  paper  and  board,  aluminium,  petrochemicals,  ammonia,  nitric, 
adipic,  glyoxal  and  glyoxylic  acid  production,  CO2  capture,  transport  in  pipelines  and 
geological storage of CO2.  

The aviation scope of the EU ETS was limited to flights within the European Economic 
Area  (EEA)  in  the  period  2013-2016,  to  sustain  momentum  in  the  International  Civil 
Aviation Organization (ICAO) for an international agreement to control greenhouse gas 
emissions  from  aviation.  To  continue  to  promote  momentum  and  to  facilitate  the 
operationalisation  of  the  ICAO’s  Carbon  Offsetting  and  Reduction  Scheme  for 
International  Aviation  (CORSIA)  and  to  facilitate  the  scheme’s  operationalisation,  in 
2017 the limitation to intra-EEA flights was prolonged until 2023 (see chapter 4).  

The EU ETS covers carbon dioxide (CO2) emissions, nitrous oxide (N2O) emissions from 
nitric,  adipic,  glyoxylic  acid  and  glyoxal  production,  and  perfluorocarbons  (PFC) 
emissions  from  aluminium  production.  Even  though  participation  in  the  EU  ETS  is 
mandatory, in some sectors only installations above a certain size are included. Moreover, 
participating countries can exclude small installations (emitting less than 25 000 tonnes of 
CO2e)  from  the  system  if  alternative  and  equivalent  measures  are  in  place.  In  phase  4 
(2021-2030),  very  small  emitters  (with  reported  emissions  of  less  than  2  500  tonnes  of 
CO2e in the last three years) can be excluded from the EU ETS subject to the existence of 
simplified  monitoring  arrangements 
their  emissions. 
to  assess 
Participating  countries  may  also  add  more  sectors  and  GHGs  to  the  EU  ETS  (the  so 
called “opt-in”). 

the  quantity  of 

* Information on phases 1 and 2 of the EU ETS can be found here: https://ec.europa.eu/clima/policies/ets/pre2013_en  

6 

 
 
 
 
According to the Article 21 reports submitted by participating countries13 in 2020, there were 
a total of 10 569 installations in 2019 covered by the ETS, with the necessary ETS permit. 

Emissions from biomass used by ETS installations increased by 4% in 2019 compared to the 
previous  year,  while  emissions  from  coal  declined  by  19%,  contributing  to  the  significant 
15% reduction in emissions from the power sector. Regarding only fuels, and as was the case 
in previous years, the fuels combusted within the EU ETS in 2019 remained overwhelmingly 
fossil. However, 29 countries also reported biomass use in connection with 2 197 installations 
(20.8% of all installations). The highest percentage of emissions from biomass compared to 
emissions  covered  by  the  EU  ETS  per  country  was  reported  by  Lithuania:  68%.  Two 
countries (LI  and MT) did  not  report any use  of biomass. Total emissions from biomass in 
2019  amounted  to  approximately  170  million  tonnes  CO2  (11%  compared  to  ETS  reported 
emissions), a clear increase from the 145 million tonnes CO2 in 2018 (8% compared to ETS 
reported emissions). Out of these, 99.2% were zero-rated14. In 2019, for the first time a small 
amount of biofuel was reported to be used. Two aircraft operators (one in DE and one in SE) 
reported covering 0.01% of the 2019 ETS aviation emissions. 

Within the installation categories based on annual emissions15, the data for 2019 shows that, 
as  in  previous  years,  72%  of  installations  are  category  A,  21%  are  category  B  and  7%  are 
category C. 6 053 installations were reported as “installations with low emissions”16 (57% of 
the total).   

Regarding EU ETS activities additionally listed for non-CO2 emissions, permits are reported 
as issued in 13 countries for primary aluminium and perfluorocarbons (PFCs) (DE, FR, EL, 
ES,  IS,  IT,  NL,  NO,  RO,  SE,  SI,  SK  and  UK),  while  for  nitric  acid  production  and  N2O 
permits are reported as issued in 21 countries (all except CY, DK, EE, IE, IS, LI, LU, LV, 
MT and SI). The other N2O sectors – adipic acid production and glyoxal and glyoxylic acid 
production  are  reported  in  three  (DE,  FR  and  IT)  and  two  (DE  and  FR)  countries, 
respectively. Only Norway and Austria declared CO2 capture and storage activities. 

As  last  year,  seven  countries  (ES,  FR,  HR,  IS,  IT,  SI  and  UK)  have  made  use  of  the 
possibility to exclude small emitters from the EU ETS in line with Article 27 of the EU ETS 
Directive. Emissions excluded for 2019 amounted to 3.81 million tonnes CO2 (some 0.25% 
of total stationary EU ETS emissions, compared to 0.17% the year before). 

13 “Article 21 reports” refer to reports submitted by Member States based on requirements in the Article 21 of the ETS 
Directive, In this context, "participating countries" or simply "countries" include the 27 EU Member States, the UK, and  the 
EEA countries (Iceland, Norway and Liechtenstein). 
14 In the EU ETS, the emission factor of biomass is set to zero if the definition of the term “biomass” is fulfilled and – where 
biofuels or bio-liquids are concerned – the sustainability criteria pursuant to Article 17(1) of Directive 2009/28/EC (the 
Renewable Energy Directive) are met. No allowances have to be surrendered for zero-rated emissions. In the 2020 Article 21 
submissions, two participating countries (LV and DK) only reported the energy content of zero-rated biomass, and not the 
actual emissions. Their emissions are therefore not taken into account in the total provided.  
15 Category C installations emit more than 500 000 tonnes CO2e per year, category B installations emit between 500 000 and 
50 000 tonnes CO2e per year, and category A installations emit less than 50 000 tonnes CO2e per year. See Commission 
Regulation (EU) No 601/2012 of 21 June 2012 on the monitoring and reporting of GHG emissions pursuant to Directive 
2003/87/EC of the European Parliament and of the Council, OJ L 181, 12.7.2012, p. 30 
16 Installations with low emissions are a sub-set within category A installations, which emit less than 25 000 tonnes CO2e per 
year (see Article 47(2) of Regulation (EU) No 601/2012).  

7 

 
 
                                                            
According to Article 21 submissions in 2020, just as in previous years, eight countries (BE, 
DK, FR, HR, HU, LI, LT and NL) have taken advantage of the provision offered by Article 
13  of  the  Monitoring  and  Reporting  Regulation  (MRR)17  to  allow  use  of  simplified 
monitoring plans in low risk cases for stationary installations. In the case of aircraft operators 
with low emissions, two countries reported use of this provision for 2019 (BE and IS). 

In 2019, 611 aircraft operators were reported as having a monitoring plan (7% fewer than in 
2018). 50% (308) of the reported operators were commercial, while the other 50% (303) were 
non-commercial.18 A total of 262 (43%) qualified as small emitters (compared to 287 (44%) 
in 2018).  

2.2 Union Registry and the European Union Transaction Log (EUTL) 

The  Union  Registry  and  the  European  Union  Transaction  Log  (EUTL)  track  the 
ownership  of  general  and  aviation  allowances  by  recording  the  amounts  owned  in  the 
accounts  and  the  transactions  between  accounts.  Furthermore,  these  systems  register  the 
emissions  of  stationary  installations  and  aircraft  operators,  and  the  compliance  with 
obligations stemming from these emissions. Both systems are operated and maintained by 
the Commission, whereas the national registry administrators in the participating countries 
remain the point of contact for the holders and representatives of the accounts (companies 
and natural persons). While the Union Registry holds accounts and registers compliance 
information,  the  EUTL  automatically  checks,  records  and  authorises  all  transactions 
between accounts, thus ensuring that all transfers comply with EU ETS rules.  

The  data  recorded  in  the  Union  Registry  and  the  EUTL  is  an  important  source  of 
information  for  various  types  of  ETS  reporting,  such  as  the  calculation  of  the  Market 
Stability  Reserve  surplus  indicator  (see  chapter  3.3)  and  the  reporting  done  by  the 
European Environment Agency. The EUTL also provides for transparency in the EU ETS 
by  publishing*  information  on  the  compliance  of  stationary  installations  and  aircraft 
operators with ETS provisions and on the transactions between accounts 

* The information published by the EUTL can be found at: https://ec.europa.eu/clima/ets/ 

The Union Registry, the EUTL, and the public website of the EUTL were fully operational 
for 365 days around the clock throughout 2019, with only minor interruptions adding up to a 
total of approximately 7 hours due to technical upgrades. 

From 1 January 2019, the Commission suspended19 all processes for the UK relating to free 
allocation,  auctioning  and  the  exchange  of  international  credits,  in  accordance  with  the 

17 Commission Regulation (EU) No 601/2012 of 21 June 2012 on the monitoring and reporting of greenhouse gas emissions 
pursuant to Directive 2003/87/EC of the European Parliament and of the Council, OJ L 181, 12.7.2012, p. 30. 
18 An example of a commercial aircraft operator would be a passenger airline providing services to the general public. An 
example of a non-commercial aircraft operator would be a privately owned aircraft. 
19 Commission Decision C(2018) 8707 of 17.12.2018 on instructing the central administrator to temporarily suspend the 
acceptance by the European Union Transaction Log of relevant processes for the United Kingdom relating to free allocation, 
auctioning and the exchange of international credits  

8 

 
 
 
                                                            
 
safeguard measures20 to protect the environmental integrity of the EU ETS in cases where EU 
law  ceases  to  apply  to  a  Member  State  withdrawing  from  the  EU.  This  suspension  was 
automatically  lifted  on  1  February  2020,  when  the  Agreement  on  the  withdrawal  of  the 
United  Kingdom21  from  the  EU  entered  into  force  and  ensured  that  UK  installations  and 
aircraft  operators  would  follow  through  with  their  compliance  obligations  stemming  from 
2019 and 2020 emissions. 

The  agreement  on  linking  the  EU  ETS  with  Switzerland’s  ETS22  entered  into  force  on  1 
January 2020. To operationalise the link between the emissions trading systems, the parties 
agreed  to  establish  a  provisional  solution23  for  linking  the  two  registries  and  enabling  the 
transfer  of  allowances  between  them.  The  provisional  solution  became  operational  on  21 
September 2020. 

In  March  2019,  Commission  Delegated  Regulation  (EU)  2019/112224  was  adopted,  setting 
the  rules  for  the  functioning  of  the  Union  Registry  in  2021-2030.  The  technical 
implementation  of  the  new  rules  introduced  by  the  Regulation  is  ongoing  and  the  new 
functionalities will be available in the Union Registry as of 1 January 2021.  

3. FUNCTIONING OF THE CARBON MARKET IN 2019  

This  chapter  provides  information  on  aspects  relating  to  the  supply  and  demand  of 
allowances  in  the  EU  ETS.  The  supply  side  section  includes  information  on  the  cap,  free 
allocation, auctioning, the derogation from full auctioning for electricity and heat production 
(Article 10c), the NER300 programme and preparations for the Innovation and Modernisation 
Funds, a chapter on indirect carbon cost compensation schemes, and the use of international 
credits.  

On  the  demand  side,  information  is  provided  on  the  quantity  of  verified  emissions.  The 
balancing  of  the  different  elements  of  the  supply  and  demand  of  allowances  in  the  carbon 
market via the Market Stability Reserve (MSR) is then presented.  

20 Commission Regulation (EU) 2018/208 of 12 February 2018 amending Regulation (EU) No 389/2013 establishing a 
Union Registry, OJ L 39, 13.02.2018, p.3. 
21 Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and 
the European Atomic Energy Community (2019/C 384 I/01), OJ C 384 I, 12.11.2019, p.1. 
22 Agreement between the European Union and the Swiss Confederation on the linking of their greenhouse gas emissions 
trading systems, OJ L 322, 7.12.2017, p.3. 
23 https://ec.europa.eu/clima/sites/clima/files/ets/markets/docs/decision_201902_swiss_ets_linking.pdf  
24   Commission Delegated Regulation (EU) 2019/1122 of 12 March 2019 supplementing Directive 2003/87/EC of the 
European Parliament and of the Council as regards the functioning of the Union Registry, OJ L 177, 2.7.2019, p. 3. 

9 

 
 
                                                            
3.1. Supply: allowances put in circulation  

3.1.1. Cap 

The  cap  is  the  maximum  absolute  quantity  of  GHGs,  which  may  be  emitted  by  covered 
entities to ensure the emission reduction target is met and that it corresponds to the number 
of allowances put in circulation over a trading period. A common EU-wide cap applies for 
the entire EU ETS. 

The  2013  cap  for  emissions  from  stationary  installations  was  set  at  2  084  301  856 
allowances.  This  cap  decreases  each  year  by  a  linear  reduction  factor  of  1.74%  of  the 
average total quantity of allowances issued annually in 2008-2012, thus ensuring that the 
maximum number of allowances that can be used by stationary installations will be 21% 
lower in 2020 than in 2005.  

The  aviation  sector  cap  was  originally  set  at  210  349  264  aviation  allowances  per  year, 
which  is  5%  below  the  average  annual  level  of  aviation  emissions  in  2004-2006.  It 
increased  by  116  524  aviation  allowances  on  1  January  2014  to  accommodate  Croatia 
joining the EU ETS. This cap was meant to reflect the 2008 legislation* which included all 
flights from, to  and  within  the EEA in  the EU ETS. However,  the scope of the EU  ETS 
was temporarily limited to flights within the EEA between 2013 and 2016 to support the 
development  of  a  global  measure  by  the  ICAO  to  stabilise  emissions  from  international 
aviation at 2020 levels. Therefore, the number of aviation allowances put into circulation 
in  2013-2016  was  significantly  lower  than  the  original  cap.  In  2017,  to  support  the 
development  of  the  ICAO  global  measure,  the  limitation  to  intra-EEA  flights  was 
prolonged until 2023 (see chapter 4). 

In  phase  4  of  the  EU  ETS  (2021–2030),  the  cap  for  both  stationary  installations  and 
aviation will decrease by a linear reduction factor of 2.2%.  

*  Directive  2008/101/EC  of  the  European  Parliament  and  of  the  Council  of  19  November  2008,amending  Directive 
2003/87/EC so as to include aviation activities in the scheme for greenhouse gas emission allowance trading within the 
Community 

Table 1 shows the figures for the cap for stationary installations and the number of aviation 
allowances put annually into circulation25 for each year during phase 3 of the EU ETS.  

25 The number of aviation allowances put into circulation since 2013 is the result of a bottom-up approach starting from free 
allocation (determined on the basis of activity-based benchmarks for operators' activity within the EEA). The number of 
allowances auctioned is then derived based on the fact that free allocation (including a special reserve for later distribution to 
fast-growing aircraft operators and new entrants) should be 85% of the total and auctioning should be 15%. 

10 

 
 
 
 
 
 
 
 
                                                            
 
 
 
 
 
 
Table 1: EU ETS cap 2013-2020 

Year 

Annual cap (installations) 

Annual aviation allowances put into 
circulation26 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

2020 

2 084 301 856 

2 046 037 610 

2 007 773 364 

32 455 296 

41 866 834 

50 669 024 

1 969 509 118 

38 879 316 

1 931 244 873 

38 711 651 

1 892 980 627 

38 909 585 

1 854 716 381 

38 946 562  

1 816 452 135 

On  1  February  2020,  the  Agreement  on  the  withdrawal  of  the  United  Kingdom  from  the 
European Union27 entered into force. The ETS Directive applies to the UK until the end of 31 
December  2020,  and  pursuant  to  the  Protocol  of  Ireland  and  Northern  Ireland28,  electricity 
generation located in Northern Ireland (NI) remains in the EU ETS with the relevant rights 
and obligations.  

The  Commission  took  these  developments  into  account  by  adopting  a  Commission 
Decision29 on the adjusted Union-wide quantity of allowances on 16 November 2020. Figure 
1 summarises the cap reduction following the increase of the linear reduction factor to 2.2% 
as of 2021, while also visualising the role of the Market Stability Reserve (MSR) feed and the 
backloading contributions to the MSR (see also chapter 3.3).  

26 The updated figures include exchanges of international credits in addition to the free allocation and auctioned amounts.  
27 https://ec.europa.eu/info/european-union-and-united-kingdom-forging-new-partnership/eu-uk-withdrawal-agreement_en 
28 https://ec.europa.eu/info/european-union-and-united-kingdom-forging-new-partnership/eu-uk-withdrawal-
agreement/protocol-ireland-and-northern-ireland_en 
29 Commission Decision C/2020/7704 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
Figure 1: Cap reduction with increase of the Linear Reduction Factor to 2.2% as of 202130 

30 The cap for 2021-2030 reflects the post-BREXIT publication of the EU ETS total volume of allowances via Commission 
Decision C/2020/7704. The impact of the increased 2030 emission reduction targets proposed by the Commission on 17 
September 2020 in the Climate Target Plan on the ETS legislation will be assessed in the upcoming climate legislation 
review exercise. 

12 

 
 
 
 
                                                            
3.1.2. Issued allowances 

3.1.2.1.Free allocation  

Although  in  phase  3  of  the  EU  ETS,  auctioning  is  the  default  allocation  method,  a 
significant  amount  of  allowances  has  been  allocated  for  free  to  industrial  installations  to 
address  the  risk  of  carbon  leakage  (a  situation  where  companies  transfer  production  to 
third countries with laxer constraints on GHG emissions, which may lead to an increase in 
their total emissions). The following principles apply: 

  Electricity production is not eligible for free allowances; 
  Free  allowances  to  manufacturing  industry  are  distributed  according  to  EU-wide 

harmonised rules; 

  The free allocation is  based on performance benchmarks to  strengthen the incentives 
for  GHG  emission  reductions  and  innovation  and  reward  the  most  efficient 
installations; 

  An  EU-wide  New  Entrants'  Reserve  (NER)  for  new  industrial  installations  and 
installations significantly increasing capacity has been established, equivalent to 5% of 
the total amount of allowances for phase 3. 

The sectors and sub-sectors deemed to be exposed to a significant risk of carbon leakage 
are  placed  on  a  carbon  leakage  list*.  While  originally  the  list  covered  the  period  2015-
2019, the revised EU ETS Directive prolonged its validity until 31 December 2020. 

In phase 3, as the demand for free allocation exceeded the amount available, the allocation 
for  all  installations  under  the  EU  ETS  was  reduced  by  the  same  percentage  through  the 
application of a "cross-sectoral correction factor (CSCF)"**. In 2017, the original CSFC 
values were revised.*** 

* The current carbon leakage list can be found here: http://eur-lex.europa.eu/legal-
content/EN/ALL/?uri=CELEX:32014D0746 

** Commission Decision 2013/448/EU, OJ L 240, 7.9.2013, p.27. 

*** Commission Decision 2017/126/EU, OJ L 19, 25.1.2017, p. 93. 

In phase 3, about 43% of the total quantity of available allowances is allocated for free, while 
the share of allowances to be auctioned by Member States amounts to some 57%. 

The  initial  New  Entrants  Reserve  (NER),  after  deducting  300  million  allowances  for  the 
NER300  programme  that  aims  to  support  innovation,  held  480.2  million  allowances.  Until 
June 2020, 171.1 million allowances have been reserved for 1089 installations for the entirety 
of phase 3.  The remaining  NER amounts to  309.1  million allowances. While it is expected 
that there will be allocation changes until the end of phase 3, a significant number of these 
allowances will remain unallocated. At the end of phase 3, the unallocated allowances from 

13 

 
 
 
the  phase  3  NER  will  be  placed  in  the  Market  Stability  Reserve  (MSR),  out  of  which  200 
million allowances will be placed in the NER for phase 4. 

Until the end of June 2020, the originally approved free allocation up to the end of phase 3 
has been reduced by around 570 million allowances due to installations that have closed or 
reduced their production or production capacity. 

Table 2: The number of allowances (in millions) allocated to industry for free from 2013 to June 
202031 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

2020 

Free allocation32  
(EU27+UK+EEA 
EFTA states) 

Allocation from the 
new entrants reserve 
(greenfield 
investments and 
capacity increases) 

Free allowances 
remaining unallocated 
due to closures or 
changes in production 
or production 
capacity 

903.0 

874.8 

847.6 

821.3 

796.2 

771.9 

748.133 

724.8 

11.7 

15.2 

18.9 

22.7 

24.4 

26.0 

26.5 

25.4 

40.6 

59.5 

73.1 

70.5 

79.1 

83.4 

79.8 

84.6 

To  prevent  the  risk  of  carbon  leakage,  free  allocation  will  continue  after  2020,  based  on 
updated  benchmark  values  derived  with  reference  to  the  performance  of  the  10%  most 
efficient  installations  in  the  EU.  In  February  2019,  the  Commission  adopted  the  carbon 
leakage  list  for  2021-203034,  which  will  be  valid  for  the  entirety  of  that  period.  This  list 
specifies which industrial sectors benefit from a higher share of free allocation.  

To reflect progress in technology and innovation, the benchmark values will  be updated for 
2021-2025  and  2026-2030  on  the  basis  of  real  data.  The  delegated  act  on  revising  the  free 

31 While figures in previous years were based on notifications by Member States until the end of June of the respective year, 
in this year’s report they are based on the Union Registry with a cut-off date 30 June 2020. This new approach was chosen to 
more accurately reflect allocations as they occur and are recorded in the Union Registry.   
32 Initial amount, before application of the reductions mentioned below.  
33 Allocation for  the UK (48.0 million allowances of the total for 2019) that was suspended in 2019 due to the safeguard 
measures to protect the environmental integrity of the EU ETS resumed in 2020.  
34 Commission Delegated Decision (EU) 2019/708, https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=OJ:L:2019:120:FULL&from=EN  

14 

 
 
 
 
 
                                                            
allocation  rules  for  2021-2030  was  adopted  in  December  201835.  It  is  expected  that  the 
implementing Regulation on revised benchmark values to be applied in the period 2021–2025 
will be adopted by the end of 2020 (see Appendix 6 to the Annex).  

In phase 4, allocations to individual installations will be adjusted in a timely manner to reflect 
significant  increases  and  decreases  in  operation.  To  prevent  manipulation  and  abuse  of  the 
allocation adjustment system and to avoid any undue administrative burden, the Commission 
adopted  an  implementing  act  defining  further  arrangements  for  the  adjustments  in  October 
201936 (see Appendix 6 to the Annex). 

3.1.2.2. Auctioning of allowances 

Auctioning is the default mode for allocating allowances. Primary auctions are governed 
by  the  Auctioning  Regulation*  which  specifies  the  timing,  administration  and  other 
aspects of how auctions should take place to ensure an open, transparent, harmonised and 
non-discriminatory process.  

* Commission Regulation (EU) No 1031/2010 of 12 November 2010 on the timing, administration and other aspects of 
auctioning of greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the European Parliament and of 
the Council establishing a scheme for greenhouse gas emission allowances trading within the Community, OJ L 302, 
18.11.2010, p.1. 

The  2019  auctions  took  place  through  the  auction  platform  EEX,  providing  auctions  as  the 
common  auction  platform  for  the  25  Member  States  participating  in  a  joint  procurement 
procedure,  for  Poland,  which  opted-out  from  the  joint  procurement  procedure  but  has  not 
appointed a separate auction platform, and for Germany as an 'opt-out' auction platform.  

EEX started auctioning for Iceland, Liechtenstein and Norway in June 2019, after the EEA 
Agreement was amended to allow them to participate in the Joint Procurement Agreement for 
the common auction platform. In agreement with the three countries, the auction volumes for 
2013-2018 are spread over the years 2019 and 2020 to ensure a stable and predictable supply 
of allowances to the market.  

In accordance with the safeguard measures adopted to protect the environmental integrity of 
the EU ETS37, no allowances were auctioned in 2019 on behalf of the United Kingdom. With 
the entry into force of the Withdrawal Agreement on 1 February 2020, the auctions for the 
UK restarted on 4 March 2020 and take place through the auction platform ICE. The quantity 
included in the 2020 UK auction calendar amounts to the combined volumes to be auctioned 
for the calendar years 2019 and 2020. 

35 Commission Delegated Regulation (EU) 2019/331, https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=OJ:L:2019:059:FULL&from=EN  
36 Commission Implementing Regulation (EU) 2019/1842, https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=uriserv:OJ.L.2019.282.01.0020.01.ENG  
37 Commission Decision C(2018) 8707 of 17.12.2018 on instructing the central administrator to temporarily suspend the 
acceptance by the European Union Transaction Log of relevant processes for the United Kingdom relating to free allocation, 
auctioning and the exchange of international credits.  

15 

 
 
 
                                                            
 
 
More than 1700 auctions had been held by 30 June 2020. Table 3 provides an overview of the 
volumes of allowances38 auctioned by the EEX and ICE up to 30 June 2020, including early 
auctions39 of general allowances. 

Table 3: Total volume of phase 3 allowances auctioned in from 2012 to 30 June 202040 

Year 

2012 

2013 

2014 

2015 

2016 

2017   

2018  

2019 

2020 (until 30 June 2020) 

Source: EEX 

General allowances  

Aviation allowances  

89 701 500 

808 146 500 

528 399 500 

632 725 500 

715 289 500 

951 195 500 

915 750 000 

588 540 000 

360 446 000 

2 500 000 

0  

9 278 000 

16 390 500 

5 997 500 

4 730 500 

5 601 500 

5 502 500 

3 371 500 

The  entering  into  operation  of  the  Market  Stability  Reserve  (MSR)  in  January  2019  has 
substantially  lowered  the  auction  supply,  as  can  be  seen  in  Table  3.  The  auctions  were 
generally conducted smoothly and the auction clearing prices were generally closely aligned 
with secondary market prices.   

Between January 2019 and June 2020, three auctions were cancelled due either to the reserve 
price not being met or due to the total bid volume falling short of the auctioned volume, in 
line with the relevant rules in the Auctioning Regulation. With these three auctions, a total of 
fifteen auctions were cancelled out of the more than 1700 auctions held since late 2012. An 
overview of the auction clearing prices from 2013 to 30 June 2020 is provided in Figure 2:  

38 The volumes of general allowances have been determined taking into account Decision 1359/2013/EU. The volumes of 
aviation allowances have been determined taking into account Decision No 377/2013/EU and Regulation (EU) No 421/2014.  
39 Early auctions of allowances in phase 3 were performed in 2012 in view of the widespread commercial practice in the 
electricity sector of selling electricity on a forward basis and purchasing the required inputs (including allowances) when 
they sell their output. 
40 The table includes auction volumes for EU27 + UK + EEA. 

16 

 
 
 
 
 
 
 
                                                            
Figure 2: Clearing price for general allowances auctions from 2013 to 30 June 2020 

___ Auction Clearing Price 

Source: EEX 

The number of participants in  the auctions of general allowances from 2013 to 30 June 2020 
is provided in Appendix 2. The auction platforms publish detailed results of each auction in a 
timely  manner  on  dedicated  websites.  Further  information  on  the  performance  of  the 
auctions, including on the participation, cover ratios and prices, can be found in the Member 
States' reports published on the Commission's website41.  

The total revenues generated by Member States, the UK and EEA countries from the auctions 
between  2012  and  30  June  2020  exceeded  EUR  57  billion  (see  Tables  2.1  and  2.2  in 
Appendix 2). In 2019 alone, the generated total revenues were above EUR 14  billion, while 
in the first half of 2020 they reached EUR 7.9 billion.  The EU ETS Directive provides that at 
least 50% of auction revenues, including all revenues generated from allowances distributed 
for the purposes of solidarity and growth, and all revenues from allowances issued in respect 
of aviation42, should be used by Member States for climate and energy related purposes.  

According to the information submitted to the Commission by the Member States, Member 
States spent or  planned to spend a total of 77% of these revenues for specified climate and 
energy  related  purposes  in  2019.  In  the  period  2013-2019,  about  78%  of  auction  revenues 
were spent for such purposes. While a small share of this amount (about 1.9 billion or 4% of 
total  revenues  in  this  period)  was  spent  on  international  climate  and  energy  purposes,  the 

41 http://ec.europa.eu/clima/policies/ets/auctioning/documentation_en.htm 
42 Article 3d(4) of Directive 2003/87/EC. 

17 

 
 
 
 
 
                                                            
majority of auction revenues in phase 3 were spent on domestic climate and energy purposes 
(mostly on renewable energy, energy efficiency and sustainable transport).43 

In  2019,  the  Auctioning  Regulation  was  amended44  to  establish  the  framework  for  the 
auctioning of allowances and the management of projects under the Innovation Fund and the 
Modernisation  Fund  in  phase  4.  The  amendment  also  reflects  the  classification  of  EU  ETS 
allowances  as  financial  instruments  under  Directive  2014/65/EU  on  markets  in  financial 
instruments (MiFID2).  

In  May  2020,  the  Commission  published  an  invitation45  to  the  procurement  of  the  third 
common  auction  platform  of  the  EU  ETS,  which  will  auction  allowances  on  behalf  of  25 
Member  States  and  the  3  EEA-EFTA  States,  as  well  as  the  allowances  for  the  Innovation 
Fund  and  the  Modernisation  Fund.  The  auctions  at  the  third  common  auction  platform  are 
expected to start in the beginning of 2021. 

3.1.2.3. Derogation from full auctioning for electricity and heat production 

Article 10c of the EU ETS Directive derogates from the general rule of auctioning in order to support investments in the 
modernisation  of  the  electricity  sector  in  certain  lower  income  EU  Member  States.  Eight  out  of  ten  eligible  Member 
States*  made  use  of  this  derogation  in  phase  3  and  allocate  to  electricity  generators  a  number  of  free  allowances 
provided corresponding investments were carried out.  
The free allowances under Article 10c are deducted from the quantity that the respective Member State would otherwise 
auction.  The  general  principle  is  that  electricity  generators  can  receive  free  allowances  of  an  equivalent  value  to  the 
investments  they  carry  out  from  their  National  Investment  Plans,  or  to  payments  made  into  a  national  fund  through 
which  such  investments  are  financed,  based  on  national  rules  for  the  implementation  of  the  derogation.  As  the  free 
allocation of allowances to electricity generators under Article 10c of the ETS Directive would in principle involve State 
aid, the national schemes for the implementation of the Article 10c derogation have been cleared under state aid rules 
and are subject to the requirements of the State Aid Guidelines. Allocation takes  place on the basis of annual reporting 
to, and authorisation by, the Commission.** 
Transitional free allocation under Article 10c will continue to be available in phase 4 but with enhanced transparency 
provisions  and  with  the  option for  eligible  Member  States  to  use  all  or  part  of  their  Article  10c  allocation  to  support 
investments within the framework of the Modernisation Fund (see chapter 3.1.2.6). Based on information submitted to 
the Commission by Member States, use of Article 10c will be limited in the next phase, with only Bulgaria, Romania, 
and Hungary opting to implement the derogation.  The other eligible Member States***, including Poland and Czechia, 
which had the highest volumes of transitional free allocation in phase 3, opted not to use the derogation any longer. 

* In phase 3, Bulgaria, Cyprus, Czechia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland and Romania were eligible 
for the derogation. Malta and Latvia decided not to make use of it. 

** Guidelines on certain State aid measures in the context of the greenhouse gas emission allowances trading scheme 
post 2012, OJ C158, 05.06.2012, p.4. 

***  In  phase  4,  Bulgaria,  Croatia,  Czechia,  Estonia,  Hungary,  Latvia,  Lithuania,  Poland,  Slovakia,  and  Romania  are 
eligible for the derogation. 

The  total  value  of  reported  investment  support  during  the  years  2009-2019  is  around  EUR 
13.1  billion.  About  83%  of  this  amount  was  dedicated  to  upgrading  and  retrofitting 
infrastructure, while the rest of the investments were in the diversification of the energy mix 
and in clean technologies.  

43 More detailed information on the use of auctioning revenues can be found in the EU Climate Action Progress Report 
2020.  
44 Commission Delegated Regulation (EU) of 28.8.2019 amending Regulation (EU) No 1031/2010 to align the auctioning of 
allowances with the EU ETS rules for the period 2021 to 2030 and with the classification of allowances as financial 
instruments pursuant to Directive 2014/65/EU of the European Parliament and of the Council 
45 https://etendering.ted.europa.eu/cft/cft-display.html?cftId=6456  

18 

 
 
 
 
                                                            
 
The number of allowances allocated for free to electricity generators in 2019 is indicated in 
Table 1.1, Appendix 1 to the Annex, while the maximum number of allowances per year is 
indicated in Table 1.2 of Appendix 1. 

Allowances  remaining  unallocated  from  phase  3  may  either  be  auctioned  or,  following  the 
provisions  of  the  EU  ETS  Directive,  may  be  allocated  in  2021-2030  to  Article  10c 
investments  selected  through  competitive  bidding  or  to  the  Modernisation  Fund.  While 
Hungary opted to transfer its unallocated 10c allowances from phase 3 to its 10c volume in 
phase 4, most other Member States decided to auction their remaining allowances. Romania 
made  use  of  both  options,  transferring  part  of  its  unallocated  allowances  to  phase  4,  and 
auctioning part of it.  

Figure 3 shows the number of 10c allowances that were allocated for the period 2013-2019 
per Member State. 

 Figure 3: Number of allowances allocated for free pursuant to Article 10c46 

Source: DG Climate Action 

Figure 4 shows the extent to which 10c allowances from each allocation year of phase 3 have 
been allocated, added to the auctions, or remain unused.  

46 The number of 10c allowances included in this figure can include allowances issued with a delay for previous years. In 
this case, the relevant amounts per year are reflected in the EUTL. 

19 

 
 
 
 
 
 
 
                                                            
Figure 4: Distribution of allowances (allocated, auctioned, remaining unused)47 

Source: DG Climate Action 

Table 4 shows the number of unused 10c allowances which have been auctioned in the period 
2013-2020, as well as the number of allowances remaining unused after allocation year 2019 
that will either be auctioned in 2021, transferred for allocation under Article 10c in phase 4, 
or transferred to the Modernisation Fund. 

Table 4: Treatment of the unused 10c allowances from allocation years 2013-201948 

Member State 

Number of 10c allowances which have 
been auctioned (in millions) 

Number of 10c allowances remaining 
unused (in millions) 

BG 

CY 

CZ 

EE 

LT 

PL 

RO 

HU 

Total 

9.8 

0.0 

0.4 

2.9 

1.2 

105.3 

15.4 

0 

135.0 

0.5 

0.0 

0.0 

0.0 

0.1 

34.7 

3.6 

0.9 

39.7 

Source: DG Climate Action 

The number of unallocated allowances that have been auctioned (or planned for auctioning) 
by Member States under the Article 10c derogation for the period 2013-2021 is indicated in 
Table 1.3 in Appendix 1 to the Annex. 

47 The figures include amounts to auction up to and including the 2020 auctioning calendar.  
48 The figues include amounts to auction up to and including the 2020 auction calendar (from allocation years 2013-2019).  
20 

 
 
 
  
 
                                                            
3.1.2.4. NER 300 programme  

The  NER  300  is  a  large-scale  funding  programme  for  innovative  low-carbon  energy 
demonstration projects. It is aimed at demonstrating environmentally safe carbon capture 
and storage (CCS) and innovative renewable energy (RES) technologies on a commercial 
scale  within  the  EU.  The  NER  300  was  funded  from  the  monetisation  of  300  million 
emission allowances from the NER. The funds were awarded to projects selected through 
two rounds of calls for proposals in December 2012 and July 2014.  

As a result of the two calls for proposals of the NER 300 programme, 38 RES projects and 1 
CCS project were awarded in 20 EU Member States, amounting to EUR 2.1 billion. By 31 
December  2019,  9  projects  are  operational:  bionergy  project  Verbiostraw  in  Germany,  on-
shore  wind  projects  Windpark  Blaiken  in  Sweden  and  Windpark  Handalm  in  Austria, 
offshore wind projects Veja  Mate  and Nordsee One in  Germany, smart  grid project Puglia 
Active Network in Italy, floating off-shore wind projects Vertimed in France and Windfloat 
in  Portugal, as  well as  the concentrated solar power project Minos in Greece. One project, 
the Italian bionergy BEST, is considered completed.  

Another three projects from the second call are advancing in their preparations to enter into 
operation  by  30  June  2021.  Given  the  challenging  economic  and  policy  context  since  the 
NER  300  programme  was  established,  22  projects  have  not  been  able  to  raise  sufficient 
additional financial support and have been withdrawn, releasing a total of EUR 1.455 billion. 
Four more projects are under various stages of development. 

The amended NER 300 Decision49 allowed for the re-investment of the released funds from 
the  cancelled  projects  of  the  first  call  (EUR  708.7    million  so  far)  in  existing  financial 
instruments  -  the  InnovFin  Energy  Demonstration  Projects  (EDP)  and  the  Connecting 
Europe Facility Debt Instrument (CEF DI), both managed by the European Investment Bank. 
This  will  allow  maximising  the  benefits  of  the  NER  300  programme  and  leveraging 
additional private investments in low-carbon innovation. 

In the period covered by the report, two new projects have been selected to benefit from the 
unspent funds of the NER 300 under the InnovFin EDP, with the support amounting to some 
EUR 95 million (see Appendix 8 to the Annex).  

Project  development  assistance  (PDA)  under  the  InnovFin  instrument  is  also  available  to 
project promoters to increase the maturity of their projects. Recently, three climate projects 
benefited from EUR 692.000 of PDA-financing, backed by the NER 300 undisbursed funds. 
These projects, in Sweden, Italy and the Netherlands, address climate change by developing 
innovative, first-of-a-kind demonstration plants (see Appendix 8 to the Annex) 

Finally,  support  of  some  EUR  34  million  from  undisbursed  NER  300  funds  was  awarded 
under  the  CEF  DI  to  three  innovative  clean  transport  projects  that  are  located  in  Italy  and 
Germany (see Appendix 8 to the Annex). 

49 Commission Decision (EU) 2017/2172 of 20 November 2017 amending Decision 2010/670/EU as regards the deployment 
of non-disbursed revenues from the first round of calls for proposals. 

21 

 
 
 
                                                            
 
 
The released funds from the cancelled projects of the second call (EUR 746 million so far) 
will be added to the resources avaible for the Innovation Fund.  

Table 5: NER 300 projects awarded under the first and second calls for proposals50 

1st Call for proposals 

2nd Call for proposals 

Projects in preparation 

Projects under status revision 

Projects in operation 

Projects completed 

Projects withdrawn 

Total 

Source: DG Climate Action 

0 

1 

8 

1 

10 

20 

6 

0 

1 

0 

12 

19 

3.1.2.5. The Innovation Fund  

The Innovation Fund is one of the two low-carbon funds created by the EU ETS Directive 
for 2021-2030. It will support, on a competitive basis, first-time market development and 
commercial scale demonstration of innovative technologies and breakthrough innovation 
in  sectors  covered  by  the  EU  ETS,  including  innovative  renewables,  energy  intensive 
industries,  carbon  capture,  utilisation  and  storage  (CCUS),energy  storage,  as  well  as 
substitute products and cross-sectoral projects. It will be funded by the auctioning of 450 
million  allowances  and  undisbursed  revenues  from  the  second  call  of  the  NER  300 
Programme.  

The first call for proposals51 under the Innovation Fund was launched in July 2020. The call 
is open for projects in eligible sectors from  EU Member States, Norway and Iceland. It will 
provide grant funding of EUR 1 billion in total to large-scale clean technology projects with 
capital  costs  of  above  EUR  7.5  million.  The  Innovation  Fund  will  give  grants  in  a  flexible 
manner, based on project-specific milestones, and can support up to 60% of the costs linked 
to  innovation.  Grants  from  the  fund  can  be  combined  with  other  public  funding  initiatives, 
such as State aid or other EU funding programmes.  The first call will be followed by regular 
calls  until  2030,  to  help  companies  invest  and  bring  to  the  market  the  breakthrough  clean 
technology solutions needed for EU climate neutrality in 2050. 

50 In line with Commission Decision 2010/670/EU, projects awarded under the first call had to reach final investment 
decision by end 2016, while projects awarded under the second call had to do so by end June 2018. 
51 The call for proposals can be accessed here: https://ec.europa.eu/info/funding-
tenders/opportunities/portal/screen/opportunities/topic-details/innovfund-lsc-2020-two-stage  

22 

 
 
 
  
 
 
                                                            
 
 
Independent  external  evaluators  will  assess  the  projects  based  on  a  comprehensive  set  of 
criteria: greenhouse gas emission avoidance, innovation potential, the financial, technical and 
operational  maturity  of  the  projects,  as  well  as  their  potential  for  scaling  up  and  cost 
efficiency.  

For  projects  that  are  found  promising,  but  not  yet  sufficiently  mature,  the  call  foresees  a 
budget of EUR 8 million to assist with project development. 

Projects can apply via the EU Funding and Tenders portal52. The deadline for submission of 
applications  to  the  first  stage  is  29  October  2020.  Applicants  will  be  informed  about  the 
results  of  the  evaluation  and  invited  to  submit  a  full  application  or  receive  project 
development assistance in the first quarter of 2021. The information on the evaluation results 
from the second stage will be provided in the fourth quarter of 2021. Grants will be awarded 
at the end of 2021. 

Furthermore, the Commission is planning to launch a dedicated call for small-scale projects 
by the end of 2020. 

3.1.2.6. The Modernisation Fund  

The Modernisation Fund is the second of the two low-carbon funds created by the EU ETS 
Directive for phase 4. It will support investments in modernising the power sector and wider 
energy  systems  in  ten  lower-income  Member  States.53  The  fund  will  be  operational  as  of 
2021. 

The  financial  resources  of  the  Modernisation  Fund  are  distributed  among  the  beneficiary 
Member  States  based  on  Article  10(d)  and  Annex  IIb  of  the  ETS  Directive.  In  addition, 
Romania,  Lithuania,  Czechia,  Croatia,  Hungary,  and  Slovakia  decided  to  transfer  more 
allowances  to  their  shares  of  the  Modernisation  Fund.  As  a  result,  almost  650  million 
allowances in total are available to the fund.  

The  ETS  Directive  defines  the  priority  areas  for  investment,  namely  generation  and  use  of 
electricity from renewable sources, the improvement of energy efficiency (except fossil fuels 
installations),  energy  storage,  the  modernisation  of  energy  networks,  and  just  transition  in 
carbon-dependent regions. At least 70% of the Modernisation Fund resources must be spent 
on  priority  investments.  Investments  in  non-priority  areas  would  be  subject  to  a  deeper 
assessment by the European Investment Bank (EIB) and a vote by an investment committee 
composed of Member States, the EIB and the Commission. 

The Commission adopted the implementing act54 on the operation of the Modernisation Fund 
in July 2020. The implementing act establishes a lean procedure where beneficiary Member 
States  are  responsible  for  the  selection,  financing  and  reporting  of  investments,  and  must 

52 https://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/home  
53 Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania and Slovakia 
54 Commission Implementing Regulation (EU) 2020/1001, https://eur-lex.europa.eu/legal-
content/EN/ALL/?uri=CELEX:32020R1001  

23 

 
 
                                                            
comply  with  applicable  State  Aid  rules.  The  Commission  will  be  responsible  for  the 
disbursement decisions, following the assessment by the EIB.  

3.1.2.7. Compensation of indirect carbon costs 

In  addition  to  EU-wide  harmonised  free  allocation  to  cover  direct  carbon  costs,  EU 
Member  States  may  grant  State  aid  to  compensate  some  electro-intensive  industries  for 
indirect  carbon  costs,  i.e.  costs  resulting  from  increased  electricity  prices  due  to  power 
generators passing on the costs of purchasing allowances to consumers.  

To  minimize  competition  distortions  in  the  internal  market,  increase  transparency,  and 
preserve  the  objective  of  the  EU  ETS  to  achieve  a  cost-effective  decarbonisation,  the 
Commission  adopted  the  EU  ETS  State  Aid  Guidelines*,  which  are  valid  until  end  of 
2020.  The  Guidelines  determine,  inter  alia,  eligible  sectors  and  maximum  amounts  for 
compensation of indirect carbon costs.  

In view of the imminent expiration of the current Guidelines, the Commission revised the 
EU  ETS  State  Aid  Guidelines  for  2021-2030.  The  new  State  Aid  Guidelines**  were 
adopted on 21 September 2020 (see also Appendix 6 to the Annex). 

*  Guidelines  on  certain  State  aid  measures  in  the  context  of  the  greenhouse  gas  emission  allowances  trading  scheme 
post 2012, OJ C158, 05.06.2012, p.4 

** Guidelines on certain State aid measures in the context of the system for greenhouse gas emission allowance trading 
post 2021, OJ C 317, 25.09.2020, p. 5–19 

To date, the Commission has approved 1455 indirect carbon cost compensation schemes in 13 
Member  States.  In  August  2019,  the  Commission  approved  a  new  scheme  for  Poland56. 
Poland  is  expected  to  start  compensating  in  2020  for  indirect  costs  incurred  in  2019.  The 
same holds for a Romanian scheme which was approved by the Commission in May 202057. 
A  number  of  other  Member  States  have  indicated  their  intention  to  start  compensating  for 
indirect costs.  

The EU ETS Directive determines that within three months of the end of each year, Member 
States that have an indirect cost compensation scheme in place should make available to the 
public,  in  an  easily  accessible  form,  the  total  amount  of  compensation  provided  and  a 
breakdown per benefitting sector and subsector. 

A summary of the data published by the Member States for compensation paid out in 2019 is 
presented  in  Table  6.  Since  Poland  and  Romania  did  not  compensate  for  indirect  costs 
incurred in 2018, these Member States are not reflected in the table. 

55 In addition, modifications have been adopted to the French and Spanish schemes. 
56 https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_53850  
57 https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_56403 

24 

 
 
 
 
                                                            
Table 6: Indirect carbon cost compensation paid out in 2019 

Country 

Duration of 
the scheme 

UK59 
DE 

2013 - 2020 
2013 - 2020 

BE (FL) 

2013 - 2020 

BE (WL) 

2017 - 2020 

NL 

EL 

LT 

SK 

FR 

FI 

ES 

LU 

2013 - 2020 

2013 - 2020 

2014 - 2020 

2014 - 2020 

2015 - 2020 

2016 - 2020 

2013 - 2015 

2018-2020 

Compensation 
disbursed in 2019 for 
indirect costs incurred 
in 2018 (in EUR 
million) 
22 
219 

35.9 

7.5 

40.3 

16.8 

0.3 

6 

102.1 

29.1 

172.2 

4.2 

Number of 
beneficiaries 
(installations) 

Auction 
revenue 2018 
(in EUR 
million)58 

Percentage of 
auction revenues 
spent on indirect 
cost compensation 

60 
898 

107 

29 

92 

50 

1 

8 

286 

61 

183 

4 

1607 
2565 

379 

501 

519 

80 

229 

818 

250 

1291 

18 

3.7% 
8.5% 

11.4% 

8.0% 

3.2% 

0.3% 

2.6% 

12.4% 

11.6% 

13.3% 

23.2% 

Source: Countries’ submissions to DG Climate Action 

The  total  indirect  cost  compensation  paid  out  by  the  10  EU  Member  States  and  the  UK  in 
2019  for  costs  incurred  in  2018  amounted  to  around  EUR  656  million.  That  is  almost  200 
million  more  than  the  amount  paid  out  in  2018.  The  notable  increase  compared  to  the 
previous year can be explained, on the one hand, by the significant budget increase of Spain 
(from  EUR  6  million  in  2018  to  EUR  172  million  in  2019),  and  on  the  other  hand  by  the 
slight increase of the carbon price used to calculate the compensation. The sustained increase 
of the carbon price in 2018 is not yet fully reflected in the amounts paid out in 2019 due to 
the fact that the Guidelines prescribe the use of the forward price at year x-1. 

One of the transparency provisions in the revised EU ETS Directive determines that Member 
States that have spent more than 25% of their auction revenues on indirect cost compensation 
in any year have to publish a report setting out the reasons why this amount was exceeded. 
The  fact  that  in  2018  auction  revenues  were  significantly  higher  than  in  previous  years, 
combined with the fact that compensation did not increase so rapidly yet given the obligation 
to  use  the  price  of  the  previous  year,  means  that  in  none  of  the  Member  States  the  25% 
threshold was reached. On average, Member States spent 7.9% of their auction revenues on 
the compensation of indirect costs. In the coming years, Member States are invited to keep a 
close watch on their budgets for this item of expenditure. 

58 Revenues from the auctioning of aviation allowances are excluded. 
59 The figures for the UK reflected in the table are the same figures as in last year’s report. The reason is comparability with 
other countries implementing indirect carbon cost compensation schemes. The UK publishes its figures faster than other 
countries and hence 2020 figures are already available here:  
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/903187/indirect-cost-
compensation-uk-2019.pdf  

25 

 
 
 
 
                                                            
3.1.3. International credits 

Participants  in  the  EU  ETS  can  still  use  international  credits  from  the  Kyoto  Protocol's 
Clean  Development  Mechanism  (CDM)  and  Joint  Implementation  (JI)  towards  fulfilling 
part of their EU ETS obligations until the end of the 2020 compliance cycle*, subject to 
qualitative  and  quantitative  restrictions.  These  credits  are  financial  instruments  that 
represent  a  tonne  of  CO2  removed  or  reduced  from  the  atmosphere  as  a  result  of  an 
emissions  reduction  project.  Credits  are  not  surrendered  directly,  but  may  be  exchanged 
for allowances at any time during the calendar year.  

According to the provisions of the  EU ETS Directive, international credits will no longer 
be used for EU ETS compliance in 2021-2030. 

* CDM and JI projects generate Kyoto carbon credits: Certified Emission Reductions (CERs) and Emission Reduction 
Units (ERUs) respectively.  

Although  the  exact  quantity  of  international  credit  entitlements  over  phases  2  and  3  (2008-
2020) partially depend on the quantity of future verified emissions, market analysts estimate 
that it will amount to approximately 1.6 billion credits. As of end June 2020, the total number 
of  international  credits  used  or  exchanged  amounted  to  around  1.54  billion,  accounting  for 
over 96% of the estimate for the allowed maximum. In 2019 alone, about 17.3 million units 
were exchanged.  

For a full overview of the international credits exchange, see Appendix 3 to the Annex. 

26 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.2. Demand: allowances taken out of circulation 

In  2019,  emissions  from  stationary  installations  participating  in  the  EU  ETS  decreased 
strongly by 9.1% compared to 2018 based on the information recorded in the Union Registry. 
As table 7 demonstrates, the decrease was mainly driven by electricity and heat production, 
where emissions fell by about 15% compared to 2018, reflecting decarbonisation from coal 
being  replaced  by  electricity  from  renewables  and  gas-fired  power  production.  Emissions 
from industry fell by close to 2%,  marking their strongest decrease in phase 3 so far. Overall, 
since the start of phase 3 in 2013, ETS emissions from stationary installations have decreased 
by 19.8%.  

Table 7: Verified emissions from stationary installations (in million tonnes CO2 equivalents)60 

Year 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

Verified total 
emissions 

Change from year 

x-1 

Verified emissions 
from electricity and 
heat production 

Change from year 

x-1 

Verified emissions 
from industrial 
installations 

Change from year 

x-1 

Real GDP growth 
rate EU27 + UK 

1 904 

1 867 

1 908 

1 814 

1 803 

1 750 

1 755 

1 682 

1 530 

-2.0% 

2.2% 

-4.9% 

-0.6% 

-2.9% 

0.2% 

-4.1% 

-9.1% 

1 206 

1 201 

1 138 

1 049 

1 043 

1 001 

996 

930 

792 

-0.5% 

-5.2% 

-7.8% 

-0.5% 

-4.1% 

-0.5% 

-6.6% 

-14.9% 

698 

666 

770 

765 

760 

750 

759 

753 

738 

-4.6% 

15.6% 

-0.7% 

-0.7% 

-1.3% 

1.3% 

-0.8% 

-1.9% 

1.8% 

-0.4% 

0.3% 

1.7% 

2.4% 

2.0% 

2.6% 

2.0% 

1.5% 

Source: EUTL, GDP data as reported on Eurostat (table code: tec00115, accessed in July 2020). Verified aviation emissions 
are reported separately in chapter 4. 

A  breakdown  of  ETS  verified  non-CO2  emissions  from  installations  by  type  of  greenhouse 
gas (N2O and PFCs) is provided in table 4.1, Appendix 4 to the Annex. 

60 Figures for EU27 + UK + EEA. The categorisation into electricity and heat production and industry in Table 7 is based on 
the NACE classification from the 2020 submission by Member States of their National Implementation Measures pursuant 
to Article 11 of Directive 2003/87/EC.   

27 

 
 
 
 
 
 
 
                                                            
The number of allowances cancelled on a voluntary basis amounts to 33 498 in 2019. In total, 
voluntary cancellations of 372 840 allowances have been recorded until June 2020. Most of 
the  cancellations  between  2013  and  June  2020  were  performed  by  account  holders  in  the 
Registries of the United Kingdom, Germany, Sweden, Norway, and the Netherlands.  

3.3. Balancing supply and demand  

At the start of phase 3 in 2013, the EU ETS was characterised by a large structural imbalance 
between the supply and demand of  allowances, equaling 2.1 billion allowances. To address 
the structural imbalance, a Market Stability Reserve (MSR) was created in 2015 to render the 
auction supply of emission allowances more flexible. The MSR began operating in 2019.  

In  2018,  the  surplus  was  1.65  billion  allowances,  while  in  2019  it  reached  a  significantly 
lower level, of 1.385 billion allowances. Figure 5 presents the development of the surplus in 
the European carbon market by the end of 2019.  

Figure 5: Development of the surplus in the European carbon market in 2013-2019 

Source: DG CLIMATE ACTION 

In  the  context  of  the  revision  of  the  EU  ETS61,  important  changes  were  made  to  the 
functioning of the MSR, as shown in the text box below.  

61 Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 
2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, and Decision (EU) 2015/1814, (OJ 
L 76, 19 March 2018, p. 3); available at: http://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=uriserv:OJ.L_.2018.076.01.0003.01.ENG&toc=OJ:L:2018:076:TOC  

28 

 
 
 
                                                            
A  key  notion  for  the  functioning  of  the  MSR  is  the  total  number  of  allowances  in 
circulation  (TNAC).  Allowances  will  be  added  to  the  reserve,  if  the  TNAC  is  above  a 
predefined upper threshold (833 million allowances) and will be released from the reserve, 
if  the  number  is  below  a  predefined  lower  threshold  (below  400  million  allowances)*. 
Thus,  the  MSR  absorbs  or  releases  allowances  if  the  circulating  ones  are  outside  of  a 
predefined range. Back-loaded and so-called unallocated** allowances will also be put in 
the reserve. From 2023, allowances held in the MSR exceeding the previous year's auction 
volume will no longer be valid.  

The total number of allowances in circulation relevant for determining the MSR feeds and 
releases is calculated on the basis of the following formula: 

TNAC = Supply – (Demand + allowances in the MSR) 

The  components  of  supply  and  demand  used  in  the  formula  are  described  in  the 
Communication from the Commission on the TNAC, which is published every year by 15 
May.*** 

*Or where measures are adopted under Article 29a of the EU ETS Directive. 

**Unallocated  allowances  are  allowances  not  allocated  pursuant  to  Article  10a(7)  of  the  EU  ETS  Directive,  i.e. 
allowances remaining in the new entrants' reserve, and resulting from the application of Article 10a(19) and (20), i.e. 
allowances  foreseen  for  free  allocation  to  installations  but  remaining  unallocated  because  of  (partial)  cessation  of 
operations or significant capacity reductions. De facto "unallocated" allowances stemming from  the application of the 
relevant carbon leakage factor to sectors not included in the carbon leakage list during the current period, as well as any 
allowances that are not allocated under Article 10c of the ETS Directive, are not foreseen to be placed in the Market 
Stability  Reserve  under  Article  1(3)  of  Decision  (EU)  2015/1814.  Such  allowances  are  therefore  not  covered  (please 
refer to p. 225 of the Impact Assessment (SWD(2015) 135 final) accompanying the 2015 proposal for revision of the EU 
ETS Directive. 

***See the latest TNAC Communication, published in May 2020: C(2020) 2835 final, 
https://ec.europa.eu/clima/sites/clima/files/ets/reform/docs/c_2020_2835_en.pdf. 

The carbon market report allows for the consolidation of supply and demand figures which 
are published according to the timeline of reporting obligations stemming from the EU ETS 
Directive and its implementing provisions.  

Figure 6 shows the composition of supply and demand in 2019. The relevant data have also 
been  published  as  part  of  the  fourth  communication  on  the  total  number  of  allowances  in 
circulation (TNAC) for MSR purposes62. 

62  C(2020) 2835 final, https://ec.europa.eu/clima/sites/clima/files/ets/reform/docs/c_2020_2835_en.pdf 

29 

 
 
 
 
 
 
 
                                                            
 
 
Figure 6: Composition of cumulative supply and demand (in million allowances) until the end of 
2019 

s
n
o

i
l
l
i

M

16000

14000

12000

10000

8000

6000

4000

2000

0

Supply

Demand and MSR holdings

Number of allowances in the reserve
Early auctions
International credits exchanged
Allowances issued for auctioning
Free allocation (10c)
Verified emissions

Banking from phase 2
NER 300 monetisation by EIB
Cancellations
Free allocation
Free allocation (NER)

Source: DG Climate Action 

In  preparation  for  the  MSR  becoming  operational  in  2019,  the  Commission  has  regularly 
published  as  from  mid-May  201763  the  TNAC  for  the  preceding  year.  In  May  2020,  the 
TNAC was published for the fourth time, corresponding to  1 385 496 166  allowances64. The 
2020 publication will continue to lead to the placement of allowances in the MSR, reducing 
the auction volume in 2020 and 2021. 

Thus, on the basis  of the  2019 and 2020 TNAC and the revised legislation, the auctions  in 
2020 were reduced by close to 375 million allowances (or nearly 35%). Auction volumes in 
2021 will also be reduced following the same approach. Appendix 7 provides information on 
the contributions by Member State to the MSR for the whole of 2020 . 

In  2021,  the  Commission  will  carry  out  the  first  review  of  the  MSR.  The  MSR  Decision 
requires that a review be carried out three years after the start of its operation (i.e. the end of 
2021). The review will be carried out in the wider context of a revision of the EU ETS in the 
light of the EU’s increased emissions reductions target for 2030, which is planned for June 
2021.  The  Commission  will  review  the  MSR  on  the  basis  of  an  analysis  of  the  orderly 
functioning  of  the  European  carbon  market,  paying  particular  attention  to  the  percentage 
figure for the MSR feed, the numerical value of the threshold, and the number of allowances 

63 C(2017) 3228 final, https://ec.europa.eu/clima/sites/clima/files/ets/reform/docs/c_2017_3228_en.pdf 
64 C(2020) 2835 final, https://ec.europa.eu/clima/sites/clima/files/ets/reform/docs/c_2020_2835_en.pdf 

30 

 
 
 
                                                            
 
to  be  released  from  the  reserve,  and  looking  also  into the  impact  of  the  reserve  on  growth, 
jobs, the EU's industrial competitiveness and on the risk of carbon leakage. 

4. AVIATION 

The  aviation  sector  has  been  part  of  the  EU  ETS  since  2012.  The  original  legislation 
covered  all  flights  outgoing  and  incoming  to  the  European  Economic  Area  (EEA). 
However,  the  EU  has  temporarily  limited  obligations  to  flights  of  all  nationalities  of 
airline  within  the  EEA,  in  order  to  support  the  development  of  a  global  measure  by  the 
International Civil Aviation Organisation (ICAO) to reduce aviation emissions.   

In October 2016, the ICAO Assembly agreed on a resolution on the Carbon Offsetting and 
Reduction  Scheme  for  International  Aviation  (CORSIA),  to  start  in  2021.  CORSIA  is  a 
carbon offsetting scheme with the objective of stabilising net emissions from international 
aviation at 2020 levels through the purchase and cancellation of  international credits. In 
light of this outcome,  the EU ETS Directive was  amended  in  2017 to prolong the intra-
EEA scope for aviation until 2023. 

The  EU  ETS  for  aviation  covers  flights  on  routes  between  aerodromes  situated  in  the 
European Economic Area (EEA), and ensures equal treatment of airlines on flight routes. 
The EU ETS Directive foresees that the European Commission will report to the European 
Parliament  and  to  the  Council  on  ways  to  implement  CORSIA  in  EU  law  through  a 
revision of the Directive. Unless actively revised, the geographic scope derogation of the 
EU  ETS  expires  at  the  end  of  2023,  reverting  to  cover  all  flights  departing  from  (and, 
unless exempted, arriving) in the EEA.   

In  2019,  allowances  were  issued  in  line  with  the  intra-EEA  scope.  The  free  allocation 
amounted to slightly over 32.4 million allowances. This number comprises the free allocation 
(slightly over 31.3 million allowances) and nearly 1.1 million free allowances allocated from 
the special reserve for new entrants and fast growing operators. Allocations from this reserve 
are doubled in 2017-2020 as they relate to the full period 2013-2020. The volume auctioned 
in 2019 was approximately 5.5 million allowances. With regard to developments in aviation 
emissions, verified emissions grew more slowly in 2019 (by 1% compared to 2018), reaching 
the level of 68.2 million tonnes of CO2. 

Table 8 shows a summary of verified emissions, free allocation, and auction volumes for the 
aviation sector since the start of phase 3.  

31 

 
 
 
 
 
 
 
 
Table 8: Verified emissions and allocation to the aviation sector (in millions) 

Year 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

2020 

Verified emissions (in 
million tonnes CO2 
equivalents) 

Change of verified 
emissions to year x-1 

Free allocation  (EU27 
+UK+EEA)65 

Free allocation from 
special reserve for new 
entrants and fast 
growing operators 

Volumes of allowances 
auctioned 

53.5 

54.8 

57.1 

61.5 

64.4 

67.5 

68.2 

2.5% 

4.1% 

7.7% 

4.8% 

4.8% 

1% 

32.4 

32.4 

32.1 

32.0 

33.1 

31.3 

31.366 

31.2 

0 

0 

0 

0 

1.1 

1.1 

1.1 

0.9 

0 

9.3 

16.4 

6.0 

4.7 

5.6 

5.5 

3.467 

Sources: EUTL, DG Climate Action, EEX 

The volumes of aviation allowances auctioned over the period 2013-2015 reflect the 2013 co-
legislator's decision to "stop the clock"68 and limit climate obligations only to flights within 
the  EEA.  Compliance  for  the  aviation  sector  was  postponed  for  2012  and  2013.  The 
postponed 2012 volumes of allowances were thus auctioned in 2014, while compliance took 
place between January and April 2015 for aviation emissions from 2013 and 2014.  

The  inclusion  of  the  aviation  sector  in  the  EU  ETS  had  a  significant  impact  on  the 
environmental  performance  of  the  system  as  a  whole.  In  Phase  3,  until  2019,  aircraft 
operators  surrendered  296  million  aviation  allowances  and  127  million  general  allowances, 
the latter figure representing the contribution of the aviation sector to the overall stringency 
of the EU ETS. 

65 These numbers do not take into account all closures of aircraft operators and free allowances from the Special Reserve. 
66 Taking into account the numbers withheld due to closures, the real allocation for 2019 would be 1.4 million below the 
presented figure. Allocation for the UK (4.31 million allowances of the total for 2019) that was suspended in 2019 due to the 
safeguard measures adopted by the Commission to protect the environmental integrity of the EU ETS, resumed in 2020. 
67 Until end June 2020 
68 Decision No 377/2013/EU of the European Parliament and of the Council of 24 April 2013 derogating temporarily from 
Directive  2003/87/EC  establishing  a  scheme  for  greenhouse  gas  emission  allowance  trading  within  the  Community  Text 
with EEA relevance, OJ L 113, 25.4.2013, p. 1. 

32 

 
 
 
 
 
 
 
 
 
                                                            
In  June  2018,  ICAO  adopted  the  CORSIA  Standards  and  Recommended  Practices 
(SARPs)69, which, together with the Implementation Elements, detail the functioning of the 
scheme.  While  supporting  the  formal  adoption  of  the  SARPs  by  ICAO,  the  EU  and  its 
Member States followed ICAO procedures to notify the existing differences between relevant 
EU legislation and CORSIA70. Differences from other States have not yet been published by 
the ICAO. 

The  significant  impact  of  COVID-19  on  international  aviation  also  had  repercussions  on 
CORSIA. Aviation emissions in  2020 are expected to  fall  to  below 40%  of 2019 levels.  In 
light of this impact, the global aviation industry, supported by numerous ICAO participating 
countries,  successfully  requested  the  altering  CORSIA’s  baseline  from  the  original  2019-
2020 average of emissions to a 2019 average only for the CORSIA pilot phase. Thereby, the 
future  offsetting  obligations  for  airlines  have  been  significantly  reduced  or  eliminated 
compared  to  the  originally  foreseen  baseline.  Whether  the  2019-only  baseline  will  be 
extended beyond 2023 is to be decided in the coming years. 

As part of the broader package of legislation under the European Green Deal and based on 
the  EU  ETS  Directive  as  amended  in  201771,  the  Commission  is  currently  preparing  a 
proposal to amend the EU ETS for aviation by June 2021. The proposal will be two-fold. It 
will  reduce  the  share  of  allowances  allocated  for  free  to  aircraft  operators,  to  reduce 
greenhouse gas emissions further. It will also address the implementation of CORSIA in EU 
law  in  a  way  that  is  consistent  with  the  EU’s  2030  climate  objectives.72  Already  agreed 
revisions to the EU ETS provide for the extension of the Linear Reduction Factor of 2.2% to 
the aviation cap as of phase 4 of the EU ETS, starting in 2021.   

69 https://www.icao.int/environmental-protection/CORSIA/Pages/SARPs-Annex-16-Volume-IV.aspx  
70 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32018D2027  
71 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2017.350.01.0007.01.ENG  
72 https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12494-Revision-of-the-EU-Emission-Trading-
System-Directive-concerning-aviation- 

33 

 
 
 
                                                            
5. MARKET OVERSIGHT 

Under  the  revised  Directive  on  Markets  in  Financial  Instruments*  (MiFID2),  emission 
allowances are  classified as  financial instruments as of 3 January 2018.  This  means that 
rules applicable to traditional financial markets (those including carbon derivatives trade 
on  leading  platforms  or  over-the-counter  (OTC))  also  apply  to  the  spot  segment  of  the 
secondary carbon market (transactions in emission allowances for immediate delivery in 
the  secondary  market).  This  segment  is  thus  put  on  equal  footing  with  the  derivatives 
market  in  terms  of  transparency,  investor  protection  and  integrity.  Oversight  in  the 
primary market continues to be covered by the Auctioning Regulation, other than issues 
related to market abuse. 

By virtue of cross-references to MiFID2 definitions of financial instruments, other pieces 
of financial market legislation apply. This is in particular the case for the Market Abuse 
Regulation  (MAR)**,  which  covers  transactions  and  conduct  involving  emission 
allowances,  on  both  primary  and  secondary  markets.  Similarly,  a  cross-reference  to 
MiFID2 in the Anti-Money Laundering Directive*** will trigger a mandatory application 
of customer due diligence checks by MiFID-licensed carbon traders to their clients in the 
secondary spot market in emission allowances. **** 

*  Directive  2014/65/EU  of  the  European  Parliament  and  of  the  Council  of  15  May  2014  on  markets  in  financial 
instruments and amending Directive 2002/92/EC and Directive 2011/61/EU  

**  Regulation  (EU)  No  596/2014  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on  market  abuse 
(market  abuse  regulation)  and  repealing  Directive  2003/6/EC  of  the  European  Parliament  and  of  the  Council  and 
Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC 

*** Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the 
use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 
648/2012  of  the  European  Parliament  and  of  the  Council,  and  repealing  Directive  2005/60/EC  of  the  European 
Parliament and of the Council and Commission Directive 2006/70/EC  

****Due  diligence  checks  are  already  mandatory  in  the  primary  market  and  in  the  secondary  market  in  emission 
allowances' derivatives. 

In  2019,  the  number  of  participants  eligible  to  bid  in  the  auctions  at  the  Common  Auction 
Platform continued to grow. Starting with  80 participants in January, the year ended with 86 
eligible  bidders  in  December  2019.  Operators  remained  the  most  dominant  category  of 
participants  eligible  to  bid  in  the  auctions  (around  70%)  followed  by  investment  firms  and 
credit institutions (around 20%) and persons exempt from MiFID requirements (10%).73  

Under the existing market abuse rules, the national competent authorities74 are responsible for 
monitoring  the  market,  both  with  respect  to  the  auctions  and  the  secondary  market.  At 

73 All data is taken from the Common Auction Platform (CAP2) monthly reports to the Commission. 
74 More detailed information on the activities of national competent authorities in monitoring the market is available in the 
2019 Carbon Market Report (COM(2019) 557 final/2), available here: https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX:52019DC0557R(01)  

34 

 
 
 
                                                            
 
European  level,  their  actions  are  coordinated  by  the  European  Securities  and  Markets 
Authority (ESMA), as is the case for other financial instruments.75  

75  The list of national competent authorities responsible under the Market Abuse Regulation can be found on ESMA’s 
webpages. The list of European Financial Intelligence Units, which deal with issues related to money laundering and terrorist 
financing, can be found on the webpages of Europol. 

35 

 
 
 
 
 
 
 
 
                                                            
6. MONITORING, REPORTING AND VERIFICATION OF EMISSIONS 

The monitoring, reporting, verification and accreditation (MRVA) requirements of the EU 
ETS  are  harmonised  in  the  Monitoring  and  Reporting  Regulation  (MRR)*  and  the 
Accreditation and Verification Regulation (AVR)**. 

The  monitoring  system in  the EU ETS is  designed  as  a 'building  block' approach  which 
allows  a  high  degree  of  flexibility  for  operators  to  ensure  cost-efficiency,  while  at  the 
same  time  achieving  high  reliability  of  the  monitored  emissions  data.  For  this  purpose, 
several  monitoring  methods  ('calculation-based'  or  'measurement-based',  as  well  as  by 
exception  'fall-back  approaches')  are  allowed.  Methods  may  be  combined  for  individual 
parts  of  an  installation.  For  aircraft  operators,  only  calculation-based  approaches  are 
feasible,  with  fuel  consumption  being  the  central  parameter  to  be  determined  for  the 
flights covered by the EU ETS. The requirement for installations and aircraft operators to 
have  a  monitoring  plan  approved  by  the  competent  authority  on  the  basis  of  the  MRR 
prevents arbitrary selection of monitoring methods and temporal variations. 

With  the  AVR  for  phase  3  and  beyond,  an  EU-wide  harmonised  approach  towards  the 
accreditation of verifiers has been introduced. Verifiers must be accredited by a National 
Accreditation  Body  (NAB)  in  order  to  carry  out  verifications  in  compliance  with  the 
AVR.  This  uniform  accreditation  system  allows  verifiers  to  operate  with  mutual 
recognition across all participating countries, thereby taking full advantage of the internal 
market and helping to ensure sufficient availability overall.  

* Commission Regulation (EU) No 601/2012 of 21 June 2012 on the monitoring and reporting of 
greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council, 
OJ L 181, 12.7.2012, p. 30. 

** Commission Regulation (EU) No 600/2012 of 21 June 2012 on the verification of greenhouse gas 
emission reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 
2003/87/EC of the European Parliament and of the Council, OJ L 181, 12.7.2012, p. 1. 

6.1.  General Developments 

Experience with the implementation of the MRR and the AVR during phase 3 of the ETS has 
shown  the  need  for  further  improvement,  clarification  and  simplification  of  rules  to  further 
promote  harmonisation,  reduce  administrative  burden  for  the  operators  and  participating 
countries, and to further enhance the efficiency of the system.  

Taking this into account,  the first update of the two Regulations so as to prepare for phase 4 
of the EU ETS and to improve and simplify the MRVA processes, took place in 2018.  The 
revised versions of the MRR76 and AVR77 entered into effect on 1 January 2019. Work on the 

76 Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018 on the monitoring and reporting of 
greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council and amending 
Commission Regulation (EU) No 601/2012, OJ L 334, 31.12.2018, p. 1–93 

36 

 
 
 
                                                            
 
second update started in February 2019. Participating countries were consulted for updating 
these  two  Regulations  on  some  targeted  issues  that  could  not  be  addressed  during  the  first 
update, such as  the implementation  of the recast of the Renewable Energy Directive78. The 
overall MRVA revision process should be concluded sufficiently ahead of the beginning of 
phase 4 in 2021. 

The efficiency of the compliance system has improved since the MRR allowed countries to 
make electronic reporting mandatory. As last year, 17 participating countries reported the use 
of  electronic  templates  or  specific  file  formats  for  monitoring  plans,  emissions  reports, 
verification reports and/or  improvement reports based on the  minimum requirements  set  by 
the Commission. 13 participating countries reported that they use some form of automated IT 
system for EU ETS reporting. 

6.2. Monitoring applied 

According to the Article 21 reports submitted in 2020, most installations use the calculation-
based  methodology79.  Only  155  installations  (1.5%)  in  23  countries  were  reported  to  use 
continuous  emissions  measurement  systems,  most  frequently  in  Germany,  the  Czechia  and 
France. While the number of countries is the same as last year, there are fewer installations 
overall using this approach. 

Only  13  countries  reported  the  use  of  the  fall-back  approach  by  34  installations,  covering 
approximately  3.0  million  tonnes  CO2e  (compared  to  2.6  million  tonnes  CO2e  by  38 
installations  in  11  countries  in  the  year  before).  One  installation  in  the  Netherlands  is 
responsible  for  42%  of  the  overall  emissions  reported  in  relation  to  the  fall-back 
methodology. 

The minimum tier defaults80 of the MRR are met by the vast majority of installations. Only 
90 category C installations (compared to 97 last year), that is 11.8%, were reported to deviate 
for at least one parameter from the requirement to apply the highest tiers for the major source 
streams. These deviations are only allowed where the operator demonstrates that the highest 
tier is technically not feasible or incurs unreasonable costs. Once these conditions no longer 
apply, the operator has to improve their monitoring system accordingly. 

Similarly,  reports  from  23  participating  countries  indicate  that  overall  22%  of  category  B 
installations are permitted with some form of deviation from the MRR default requirements, 

77 Commission Implementing Regulation (EU) 2018/2067 of 19 December 2018 on the verification of data and on the 
accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council, OJ L 334, 
31.12.2018, p. 94–134 
78 Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the 
use of energy from renewable sources, OJ L 328, 21.12.2018, p. 82–209 
79 The main reason for this is that the measurement-based methodology involves the deployment of significant resources and 
know-how for the continuous measurement of the concentration of relevant GHGs, which a lot of smaller operators do not 
have. 
80 Commission Regulation (EU) No 601/2012 requires all operators to meet certain minimum tiers, with larger emission 
sources required to meet higher tiers (involving more reliable data quality), while for cost-efficiency reasons less strict 
requirements apply for smaller sources. 

37 

 
 
                                                                                                                                                                                         
which is nearly similar compared to 19% last year and 21% the year before, demonstrating a 
steady level of the highest tier compliance. 

6.3. Accredited verification 

The  total  number  of  verifiers  is  not  reported  in  Article  21  reports.  However,  the  European 
cooperation for Accreditation (EA) provides a central link to relevant National Accreditation 
Bodies (NABs) and their lists of EU ETS accredited verifiers81.        

The mutual recognition of verifiers among participating countries is working successfully: 28 
countries reported that at least one foreign verifier is active in their territory. 

Compliance of verifiers with the AVR is found to be high. No country reported a suspension 
or  withdrawal  of  accreditation  of  a  verifier.  This  compares  to  one  suspension  and  no 
withdrawals  for  2018.  Germany  reported  a  reduction  made  in  the  scope  of  six  verifiers' 
accreditation,  and  Poland  for  one  verifier  for  2019,  compared  to  scope  reductions  for 
respectively two, one  and three  verifiers reported by Germany, France and Poland  in  2018. 
Seven countries reported complaints received about verifiers this year (three fewer than last 
year). The overall number of complaints (66) is 7% lower. 71% of the complaints received 
are detailed as resolved at the time of reporitng (last year this rate was 93%). Eight countries 
reported  identification  of  verifier  non-conformities  as  part  of  the  information  exchange 
process between NABs and competent authorities (compared to ten last year). 

7. OVERVIEW OF ADMINISTRATIVE ARRANGEMENTS  

Countries participating in the EU ETS use different approaches regarding the competent 
authorities in charge of its implementation. In some countries several local authorities are 
involved, while in others the approach is much more centralised.  

According to Article 21 submissions in 2020, there were, on average, 4 competent authorities 
involved in EU ETS implementation per country.82 With regard to the coordination between 
authorities,  different  tools  were  reported,  such  as  legislative  instruments  for  central 
management  of  monitoring  plans  (in  14  countries),  binding  instructions  and  guidance  by  a 
central competent authority to local authorities (in 10 countries), and regular working groups 
or  meetings  between  authorities  (in  13  countries).  Seven  countries  indicated  that  no  such 
tools are in place (CY, IE, IS, IT, LI, LU and MT).  

On administrative fees charged in relation to permitting and approval of monitoring plans, 13 
countries reported in 2020 that they do not charge any fees to installation operators (CY, DE, 
EE, EL, IE, LI, LT, LU, LV, MT, NL, SE, SK), the same as last year. Aircraft operators in 15 

81 EA list of access points to NABs accrediting verifiers for EU ETS: https://european-accreditation.org/national-
accreditation-bodies-having-successfully-undergone-peer-evaluation-by-ea/ 
82 In some cases, countries may be reporting a multiple number of regional/local authorities as one competent authority. 

38 

 
 
 
 
                                                            
 
countries do not pay fees (BE, CY, CZ, DE, EE, ES, EL, LI, LT, LU, LV, MT, NL, SE, SK). 
Charges  vary  significantly  across  countries  and  types  of  services,  ranging  from  EUR  5  to 
EUR 7283.17 for permit and monitoring plan approval for installations and from EUR 2.19 to 
EUR 2400 for the same service for aviation operators. 

Overall,  participating  countries'  ETS  administrative  organisation  is  largely  effective. 
Communication and the sharing of best practices, including via the activities of the EU ETS 
Compliance Forum and the annual EU ETS Compliance Conference, should continue to be 
reinforced and encouraged.  

8. COMPLIANCE AND ENFORCEMENT  

The EU ETS Directive provides for an excess emissions penalty in the form of EUR 100 
(indexed  to  inflation)  for  each  tonne  of  CO2  emitted  for  which  no  allowance  has  been 
surrendered  in  due  time,  as  well  as  requiring  allowances  to  be  surrendered  for  these 
emisisons. Other penalties applicable to infringements in implementation of EU ETS are 
according to the national provisions set by the concerned country. 

For the 2019 compliance cycle, despite the difficult economic situation due to the COVID-19 
crisis, the level of compliance with the EU ETS remained very high: most operators, covering 
more  than  99%  of  emissions  from  stationary  installations,  complied  with  their  legal 
obligations  in  March  and  April  2020.  Non-compliant  installations  were  typically  small. 
Around  500  aircraft  operators  reported  and  complied,  including  more  than  100  commercial 
aircraft operators that are based outside of the EU but operate flights within the EEA. Non-
compliant operators were typically small or ceased operating in 2018. 

The  competent  authorities  continue  to  carry  out  different  compliance  checks  on  the  annual 
emissions  reports.  Based  on  Article  21  submissions  in  2020,  all  participating  countries83 
check  annual  emission  reports  from  installations  for  completeness  (100%  of  reports  except 
BE  31%,  ES  94%,  FR  95%),  and most  countries  check  reports  from  aircraft  operators  -  all 
except  Hungary,  Latvia  (both  have  two  aircraft  operators)  and  Liechtenstein  (no  aircraft 
operators).  The  reports  further  indicate  that  on  average  countries  check  about  83%  of 
installations’ reports for consistency against monitoring plans (with 91% of aviation reports) 
and  about  70%  of  installations’  reports  against  allocation  data.  Twenty-three  countries 
reported that they also carry out cross-checks against other data for both installations and 24 
countries do this for aircraft operators.  

Competent  authorities  in  12  countries  carried  out  conservative  estimates  regarding  missing 
data in the case of 101 installations (approximately 1% of installations overall), almost twice 
as many as in the previous three years.  The increase seems to be due to a higher number of 

83 Italy did not answer the relevant question in the 2020 submission, therefore, for this country data from the previous year 
was used as an approximation.  

39 

 
 
 
 
                                                            
 
conservative estimates in the Netherlands (51 affected installations in 2019 compared to 11 in 
2018),  because  of  more  received  notifications  of  monitoring  errors  compared  to  previous 
years.  The  reported  quantity  of  affected  2019  emissions  was  61.0  million  tonnes  CO2 
(compared  to  11.2  million  tonnes  CO2  in  2018),  approximately  4%  of  overall  emissions 
(compared  to  0.7%  in  2018).  The  most  common  reasons  given  for  making  conservative 
estimates were emission reports that were not fully in line with MRR requirements and the 
absence of an emission report by 31 March. 

Conservative estimates regarding missing data for aviation were reported by seven countries 
concerning 33 aircraft operators (5.4% of all operators), and 1.6% of aviation emissions.  

Competent authorities' checks remain important to supplement the verifier’s work. For 2019, 
all  countries  confirmed  that  they  carry  out  further  checks  in  the  case  of  installations.  Most 
countries reported a similar approach regarding aircraft operators (all except HU, IT, LI and 
LV).  Most  countries  (all  except  EL,  IT,  LU  and  MT)  reported  that  they  carried  out  spot 
checks at installations in 2019, and almost half the countries reported spot checks for aviation 
(all except BG, CY, CZ, EE, ES, FI, FR, EL, HU, IT, LI, LT, LU, LV, MT, NO, PT and UK). 

In  2019,  the  application  of  excess  emissions  penalty  was  reported  for  25  installations  by  8 
countries  (DE  1,  DK  2,  ES  1,  IT  4,  PL  2,  PT  1,  RO  7  and  UK  7).  For  aviation,  excess 
emission penalties were reported for 34 aircraft operators (CY 1, DE 3,  ES 4, IT 3, PT 11 
and UK 12).  

Six countries confirmed issue of penalties (other than excess emissions penalties) in 2019. No 
imprisonments  were  reported,  but  fines,  formal  notices,  and  warning  letters  were  noted  as 
carried out or  yet to  be carried out (e.g. due to  ongoing  legal proceedings), amounting to  a 
total financial value of EUR 7.8 million (of which EUR 0.15 million for aviation). 

The  most  common  violations  reported  for  2019  were  failure  to  submit  verified  annual 
emission  reports  by  the  due  deadline,  failure  to  notify  planned  or  effective  changes  to 
capacity,  activity  levels  and  operation  of  an  installation  on  time,  and  failure  to  monitor  in 
accordance with the approved monitoring plan and Regulation (EU) No 601/2012. 

As  reported  last  year,  a  fifth  EU  ETS  compliance  cycle  evaluation  took  place  in  2018  and 
2019,  with  the  aim  to  identify  EU  ETS  compliance  issues  at  the  level  of  participating 
countries and support them in improving their implementation of the EU ETS. The evaluation 
was finalised in 2020 and a technical report on the results was published84. 

The report concludes that, while the quality and effectiveness of the approval of Monitoring 
Plans,  the  review  of  Annual  Emission  Reports  and  Verification  Reports,  as  well  as 
inspections  have  improved  due  to  the  increased  use  of  the  Commission’s  templates  and  IT 
systems, as well as strengthened Competent Authority procedures, some MRV areas continue 
to  cause  interpretation  problems  and  would  benefit  from  dedicated  training  or  tailored 
guidance. 

84 https://ec.europa.eu/clima/sites/clima/files/ets/monitoring/docs/report_5th_compliance_en.pdf 

40 

 
 
                                                            
Differences in Member States’ implementation can mostly be found in the review of Annual 
Emission Reports and Verification Reports, and in the follow-up of issues identified during 
verification, inspection procedures,and enforcement. While these differences do not seem to 
have  a  detrimental  effect  on  the  robustness  of  the  MRV  system,  in  some  areas  -  such  as 
information  exchange  across  borders,  follow-up  of  recommendations  for  improvement,  and 
inspection  procedures,  improvements  can  be  made  at  the  EU  level.  Member  States’ 
recommendations for improvement have been made in tailored action plans.  

Once  the  revisions  of  the  regulations  start  to  apply,  some  of  the  areas  of  improvement 
identified  in  the  analysis  can  likely  be  resolved.  Tailored  updates  in  guidance  material, 
templates  and  following  the  recommendations  listed  in  Member  States’  action  plans  can 
improve implementation even more. Specific recommendations to this effect have been made 
in the technical report and in the Member States’ action plans. 

9. CONCLUSIONS AND OUTLOOK  

In  2019,  greenhouse  gas  emissions  from  EU  ETS-covered  installations  marked  a  historical 
fall  of  9.1%  compared  to  2018.  This  was  mainly  driven  by  a  reduction  of  almost  15%  in 
emissions  from  electricity  and  heat  production,  with  a  strong  penetration  of  renewable 
sources  of  energy,  increased  use  of  natural  gas  and  a  reduction  of  coal  of  around  19%. 
Emissions  from  industry  also  marked  their  strongest  decrease  in  phase  3  so  far,  of  close  to 
2%.  Verified  aviation  emissions  however  continued  growing,  albeit  by  a  much  smaller 
amount than in previous years  (1% above 2018).  

The legislative changes agreed in recent years to reinforce the ETS and to address the surplus 
of  allowances  continue  to  show  positive  results.  The  Market  Stability  Reserve  surplus 
indicator  was  published  for  the  fourth  time  in  May  2020,  showing  that  the  surplus  has 
decreased to around 1.39 billion allowances. On the basis of the surplus and the revised EU 
ETS legislation for phase 4, the auctions in 2020 were reduced by nearly 40% (around 375 
million allowances). Auction volumes in 2021 will be reduced in a similar manner.  

Despite the difficult economic situation for industry and aviation due to the COVID-19 crisis, 
the  carbon  price  signal  remained  stable  between  January  2019  and  end  June  2020,  with  a 
short  exception  in  March/April.  The  total  revenues  generated  by  the  EU  ETS  from  the 
auctions  between  2012  and  30  June  2020  exceeded  EUR  57  billion,  with  total  revenues  to 
Member States of more than  EUR 14 billion in 2019 and EUR 7.9 billion in the first half of 
2020. A large part of these revenues are used by the Member States for climate action. 

Moreover, in spite of the exceptional circumstances in 2020, the level of compliance with the 
EU ETS for 2019 remained very high: most operators, covering more than 99% of emissions 
from  stationary  installations,  complied  with  their  legal  obligations.  For  both  stationary 
installations  and  aircraft  operators,  non-compliant  operators  were  typically  small.  The  EU 

41 

 
 
 
 
 
 
ETS architecture remained robust and the administrative organisation across Member States 
proved  to be effective. 

In the following years, as part of the broader package of legislation under the European Green 
Deal,  the  ETS  could  undergo  substantive  revisions  regarding  its  scope  and  aviation 
requirements,  to  enable it to  meet  the  EU’s  heightened  climate  ambitions.  2021  will  be  the 
first  year  of  implementation  of  phase  4  of  the  EU  ETS.  The  next  carbon  market  report, 
foreseen  for  publication  in  late  2021,  will  provide  an  overview  of  the  entire  ETS 
implementation in phase 3. It will also provide a first look at the operation of the EU ETS in 
phase 4.  

42 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX  

Appendix 1 

Table 1.1: Number of free allowances allocated for modernising the electricity sector85 

Member 
State 
BG 

CY 

CZ 

EE 

HU86 

LT 

PL87 

RO 

Total 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

11 009 416 

9 779 243 

8 259 680 

6 593 238 

3 812 436 

2 471 297 

1 948 441 

2 519 077 

2 195 195 

1 907 302 

1 583 420 

1 259 538 

935 657 

575 789 

25 285 353 

22 383 398 

20 623 005 

15 831 329 

11 681 994 

7 661 840 

3 830 905 

5 135 166 

4 401 568 

3 667 975 

2 934 380 

2 055 614 

38 939 

19 471   

7 047 255 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

n.a. 

322 449 

297 113 

269 475 

237 230 

200 379 

158 922 

94 432 

65 992 703 

52 920 889 

43 594 320 

31 621 148 

21 752 908 

31 942 281 

16 912 108 

15 748 011 

8 591 461 

9 210 797 

7 189 961 

6 222 255 

3 778 439 

1 723 016   

133 059 430 

100 568 867 

87 532 554 

65 990 706 

46 985 124 

46 987 375 

25 104 162 

Source: DG Climate Action 

Table 1.2: Maximum number of free allowances per year under the derogation from full auctioning for 
electricity and heat production 

Member 
State 
BG 

CY 

CZ 

EE 

HU 

LT 

PL 

RO 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

Total 

13 542 000 

11 607 428 

9 672 857 

7 738 286 

5 803 714 

3 869 143 

1 934 571 

54 167 999 

2 519 077 

2 195 195 

1 907 302 

1 583 420 

1 259 538 

935 657 

575 789 

10 975 978 

26 916 667 

23 071 429 

19 226 191 

15 380 953 

11 535 714 

7 690 476 

3 845 238 

107 666 668 

5 288 827 

4 533 280 

3 777 733 

3 022 187 

2 266 640 

1 511 093 

755 547 

21 155 307 

7 047 255 

0 

0 

0 

0 

0 

0 

7 047 255 

582 373 

536 615 

486 698 

428 460 

361 903 

287 027 

170 552 

2 853 628 

77 816 756 

72 258 416 

66 700 076 

60 030 069 

52 248 393 

43 355 049 

32 238 370 

404 647 129 

17 852 479 

15 302 125 

12 751 771 

10 201 417 

7 651 063 

5 100 708 

2 550 354 

71 409 917 

Total 

151 565 434 

129 504 488 

114 522 628 

98 384 792 

81 126 965 

62 749 153 

42 070 421 

679 923 881 

Source: DG Climate Action 

85 The number of 10c allowances listed in this table can include allowances issued with a delay for previous years. In this 
case, the relevant amounts per year are reflected in the EUTL.  
86 HU made use of the Article 10c derogation only in 2013. 
87 Final allocation numbers for Poland will be available in next year’s report, pending the finalisation of all allocation 
requests.  

43 

 
 
 
 
 
 
                                                            
Table 1.3: Number of unused free allowances under the Article 10c  derogation which have been 
auctioned or are planned for auctioning in 2013-202188 

Member State 

2015 

2016 

2017 

2018 

2019 

2020 

0 

0 

5 444 169 

1 461 360 

920 823 

604 908 

1 386 372 

0 

0 

0 

0 

0 

0 

0 

90 694 

77 741 

66 740 

54 550 

80 295 

188 682 

134 897 

1 767 499 

761 088 

50 026 

259 924 

1 196 

0 

0 

456 725 

191 229 

161 522 

128 105 

7 491 

0 

55 800 000 

49 520 000 

2 104 468 

6 710 664 

3 540 974 

3 011 456 

0 

0 

0 

0 

0 

0 

0 

0 

BG 

CY 

CZ 

EE 

LT 

PL 

RO 

HU 

Appendix 2 

2021 

476 621 

0 

0 

0 

76 120 

34 501 29989 

827 338 

0 

Figure 2.1: Number of bidders in general allowances auctions from 2013 to 30 June 2020 

Source: EEX 
.  Number of bidders  

88 No unused Article 10c allowances were auctioned in 2013 and 2014. 
89 Final numbers for Poland will be available in next year’s report, pending the finalisation of all allocation requests. 

44 

 
 
 
 
 
                                                            
Table 2.1: Revenues generated from the auctioning of emission allowances by Member States and the UK in the period 2012 – 30 June 2020 (in million EUR)90 

2012 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

2020 

l
a
r
e
n
e
G

y
l
r
a
e
(

)
s
n
o
i
t
c
u
a

n
o
i
t
a
i
v
A

y
l
r
a
e
(

)
s
n
o
i
t
c
u
a

l
a
r
e
n
e
G

11.05 

0.00 

55.75 

0.00 

0.00 

114.99 

22.14 

1.58 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

52.63 

0.35 

0.00 

0.00 

n
o
i
t
a
i
v
A

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

l
a
r
e
n
e
G

n
o
i
t
a
i
v
A

l
a
r
e
n
e
G

n
o
i
t
a
i
v
A

l
a
r
e
n
e
G

n
o
i
t
a
i
v
A

l
a
r
e
n
e
G

n
o
i
t
a
i
v
A

l
a
r
e
n
e
G

n
o
i
t
a
i
v
A

l
a
r
e
n
e
G

n
o
i
t
a
i
v
A

l
a
r
e
n
e
G

n
o
i
t
a
i
v
A

52.17 

1.18 

76.24 

2.36 

58.81 

0.65 

78.74 

0.69 

208.20 

2.16 

180.94 

2.89 

82.07 

1.50 

95.03 

2.05 

138.96 

2.69 

107.14 

0.74 

143.52 

0.79 

379.00 

2.47 

353.47 

3.30 

160.28 

1.70 

36.19 

0.22 

120.91 

0.43 

0.30 

0.00 

0.00 

0.00 

86.40 

0.91 

1.42 

0.49 

85.08 

0.25 

130.15 

0.27 

367.34 

0.83 

439.19 

1.11 

205.96 

0.58 

0.00 

0.39 

6.15 

0.41 

24.66  

1.30 

24.4 

20.09 

0.16 

26.97 

0.18 

70.96 

0.55 

71.97 

1.74 

0.74 

17.03 

0.91 

32.52 

0.37 

55.24 

0.47 

110.30 

1.20 

117.63 

0.33 

199.43 

0.35 

583.33  

1.10 

628.94 

1.46 

329.84 

0.75 

166.18 

17.52 

791.25 

0.00 

749.97 

0.00 

1093.31 

16.87 

845.74 

4.65 

1141.74 

5.07 

2565.34 

16.31 

3146.14 

17.89 

1149.91 

0.00 

1.07 

0.00 

14.84 

68.53 

13.28 

43.46 

3.99 

0.00 

0.00 

0.00 

56.06 

18.07 

0.00 

0.00 

46.93 

1.16 

68.64 

7.41 

0.04 

21.13 

2.71 

0.15 

52.93 

0.74 

70.93 

0.79 

187.32 

2.48 

162.78 

23.57 

0.04 

39.31 

0.05 

139.89 

0.14 

142.65 

3.31 

0.20 

73.56 

1.70 

65.81 

0.08 

0.00 

147.64 

0.00 

129.97 

1.10 

190.17 

4.99 

146.68 

1.37 

196.57 

1.46 

518.96 

4.57 

503.34 

6.11 

229.19 

3.16 

0.00 

346.11 

0.00 

323.53 

6.56 

473.20 

16.32 

364.97 

4.48 

488.78 

4.77 

1291.07 

14.97 

1225.22 

19.97 

555.93 

10.31 

0.00 

66.97 

0.00 

62.68 

0.81 

91.64 

2.13 

70.63 

0.58 

94.64 

0.62 

249.84 

1.96 

217.35 

2.60 

98.33 

1.33 

0.00 

219.25 

0.00 

205.29 

10.05 

299.94 

12.18 

231.34 

3.35 

309.85 

3.55 

818.40 

11.16 

711.64 

14.89 

322.10 

7.69 

0.00 

0.00 

34.59 

41.68 

0.00 

0.00 

56.21 

0.29 

82.28 

35.11 

0.87 

51.32 

0.99 

2.15 

63.43 

0.27 

84.94 

0.29 

224.48 

0.91 

226.8 

1.21 

102.98 

0.62 

39.54 

0.59 

52.93 

0.63 

140.10 

1.97 

121.64 

2.62 

54.97 

1.37 

76.50 

0.00 

385.98 

0.00 

361.25 

5.24 

528.00 

14.41 

407.23 

3.29 

0.00 

19.98 

0.00 

17.28 

0.06 

28.13 

0.29 

20.76 

3.96 

0.08 

545.44 

31.43 

4.21 

0.09 

1440.10 

13.22 

1271.35 

17.64 

576.06 

80.11 

0.25 

83.69 

0.35 

39.49 

9.11 

0.17 

AT 

BE 

BG 

CY 

HR 

CZ 

DE 

DK 

EE 

EL 

ES 

FI 

FR 

HU 

IE 

IT 

LT 

90 Source: EEX 

45 

 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
LU 

LV 

MT 

NL 

PL 

PT 

RO 

SE 

SI 

SK 

UK 

0.74 

2.13 

0.27 

0.00 

0.00 

0.00 

4.97 

10.79 

4.47 

0.00 

0.00 

0.00 

4.52 

0.63 

6.62 

10.08 

0.14 

14.76 

3.81 

0.10 

5.62 

0.22 

0.53 

0.57 

5.08 

0.06 

6.81 

0.07 

18.09 

0.20 

11.36 

0.15 

15.24 

0.15 

40.20 

0.49 

4.30 

0.16 

5.78 

0.17 

15.19 

0.52 

16.79 

41.92 

15.21 

0.28 

0.66 

0.71 

7.74 

0.17 

18.58 

0.33 

6.97 

0.37 

25.61 

0.00 

134.24 

0.00 

125.63 

5.47 

183.57 

3.68 

141.59 

1.01 

189.63 

1.07 

500.84 

3.37 

435.64 

4.50 

197.44 

2.33 

0.00 

0.00 

244.02 

10.65 

39.71 

7.07 

3.51 

12.19 

0.00 

72.78 

0.00 

122.74 

0.00 

0.00 

0.00 

35.67 

17.74 

61.70 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

78.01 

0.00 

129.84 

2.98 

135.57 

0.58 

505.31 

0.69 

1209.98 

1.59 

2545.94 

2.89 

1384.13 

4.38 

65.82 

1.27 

96.32 

2.89 

74.29 

0.79 

99.50 

0.85 

262.96 

2.65 

253.58 

3.53 

115.37 

1.83 

97.57 

0.32 

193.62 

1.60 

193.56 

0.44 

260.29 

0.47 

717.64 

1.45 

747.87 

1.95 

369.33 

1.00 

33.34 

1.02 

48.79 

16.59 

0.05 

24.28 

57.59 

0.04 

84.31 

3.63 

0.14 

0.20 

37.61 

1.00 

50.45 

1.06 

132.98 

3.34 

18.70 

0.04 

25.05 

0.04 

66.19 

0.12 

124.1 

65.14 

4.43 

0.16 

56.52 

2.29 

29.42 

0.08 

64.99 

0.06 

87.01 

0.06 

229.74 

0.18 

244.47 

0.24 

111.50 

0.12 

75.74 

0.00 

409.63 

0.00 

387.42 

14.08 

567.72 

18.54 

418.96 

5.37 

604.02 

5.30 

1607.32 

0.00 

0 

0 

1043.32 

0.83 

TOTAL 

603.52 

17.53 

3550.73 

0.00 

3115.11 

53.53 

4815.97 

117.26 

3761.57 

32.28 

5490.60 

34.14 

14090.23 

90.27 

14002.17 

117.37 

7436.36 

55.11 

46 

 
 
 
Table 2.2: Revenues generated from the auctioning of emission allowances by EEA countries in the period 
2019 - 30 June 2020 (in million EUR)91 

2019 

2020 

General 

Aviation 

General 

Aviation 

IS 

LI 

NO 

TOTAL 

23.91 

0.52 

476.78 

501.21 

1.86 

0 

18.24 

20.1 

16.26 

0.47 

332.17 

348.90 

1.66 

0.00 

15.84 

17.51 

Appendix 3 

Table 3.1: Summary of international credits exchange until June 202092 

International 
credits 
exchanged by 
end June 2020 
CERs 

China 

India 

Uzbekistan 

Brazil 

Vietnam 

Chile 

Mexico  

Korea  

Others 

TOTAL CERs 
and ERUs 

Source: EUTL 

million 

percentages 

International 
credits 
exchanged by 
end June 2020 
ERUs 

288,86 

213.31 

20.30 

10.17 

6.00 

3.71 

3.21 

3.17 

2.93 

26.06 

480.94 

60,06% 

73.85 

Ukraine 

Russia 

Poland 

Germany 

France 

Bulgaria 

Others 

7.03 

3.52 

2.08  

1.28 

1.11  

1.10 

1.01 

9.02 

100% 

million 

percentages 

192,07 

147.69 

32.06 

2.82 

1.65 

1.24 

0.50 

6.11 

39,94% 

76.89% 

16.69% 

1.46% 

0.85% 

0.64% 

0.26% 

3.21% 

Table 3.2: Summary of international credits exchange until June 2020 by type of installations  

International credits 
exchanged by end June 
2020 by: 
Stationary installations 

Aviation operators  

CERs 
in million   

282.54 

6.32 

ERUs 
in million  

191.25 

0.82 

91 Source: EEX 
92 UK exchanges that were suspended in 2019 due to the safeguard measures adopted to protect the environmental integrity 
of the EU ETS resumed in 2020. 

47 

 
 
  
  
 
 
 
 
 
 
 
 
 
 
                                                            
288.86 

192.07 

TOTAL 

Source: EUTL 

Appendix 4 

Table 4.1 ETS verified non-CO2 emissions from installations by type of greenhouse gas 2013-2019 (in 
million tonnes)93 

2013 

2014 

2015 

2016 

2017 

2018 

2019 

PFCs 

0.40 

0.74 

0.58 

0.64 

0.51 

0.64 

0.57 

N2O 

2.48 

5.48 

5.31 

4.62 

4.92 

4.108 

3.68 

Source: EUTL 

Appendix 5 

Table 5.1: Selected rulings of the Court of Justice of the EU relevant to the functioning of the EU ETS in 
the period July 2019 to June 2020 

Case 
reference 

Case 
C‑ 189/19 

Legislation 
Concerned 

Parties 

Context of the case 

Date 

Finding by the Court 

Commisison 
Decision 
2011/278 

 Spenner 
GmbH & Co. 
KG/DE 

14.05.
2020 

Spenner Gmbh wanted to 
receive more free allocation 
for phase 3 of the ETS (2013-
2020), claining that the 
German competent 
authority  did not give it 
enough free allocation 
because of is 
misinterpretation of the 
2011/278/EU Commission 
Decision, in particular Article 
9 that concerns historical 
activity levels.  

The Court ruled that 
Article 9 (9) of Decision 
2011/278 does not apply to 
significant increases in the 
capacity of a working 
installation that occurred 
before the base period 
determined in accordance 
with Article 9 (1) of the 
decision, and that Article 9 
(1) of Decision 2011/278 
does not oblige the 
competent authority to 
determine the relevant 
base period itself in order 
to assess the historical 
activity levels of an 
installation. 

93 For some installations, emissions from N2O or PFCs might not have been reported separately in the Union Registry, with 
the total emissions reported in tonnes of CO2 equivalent instead. The data in the table reflects the breakdown of emissions by 
GHG as available in the Union Registry. Emissions of N2O were included in the EU ETS as of phase 2 (from 2008) as a 
voluntary opt-in by some Member States, and together with PFCs on a mandatory basis– as of phase 3 (from 2013). 

48 

 
 
 
 
 
                                                            
 
Case 
C‑ 113/19 

Luxaviation 
SA/ Minister 
for the 
Environment, 
Luxembourg 

Directive 
2003/87/EC, 
Charter of 
Fundamenta
l Rights of 
the 
European 
Union 

26.03. 
2020 

Luxaviation thought it had 
completed the procedure for 
surrendering emission 
allowances in 2016, but 
according to the Ministry of 
the Environment this was not 
the case. In June 2016, the 
Minister for the Environment 
indicated to Luxaviation that 
it had failed to carry out the 
surrender required in the time 
allowed, namely before 30 
April of that year. A penalty 
was imposed and 
Luxaviation’s name was 
published on the website of 
the Environment Agency.  

The Court ordered that 
Articles 20, 47 and Article 
49(3) of the Charter of 
Fundamental Rights of the 
EU do not preclude that 
the flat-rate penalty under 
the ETS Directive can be 
varied by a national court, 
Article 41 of the Charter 
does not  apply to the issue 
of whether it is obligatory 
or optional for Member 
States to issue warnings or 
reminders to operators 
acting in good faith, and 
that the principle of the 
protection of legitimate 
expectations does not 
preclude the imposition of 
the penalty provided for in 
Article 16(3) of Directive 
2003/87, in a situation 
where the competent 
authorities did not warn 
the operator prior to the 
expiry of the time limit for 
surrender.  

Appendix 6 

Table 6.1: State of play of EU ETS phase 4 implementation  

Measure 

Purpose 

Carbon Leakage List 
for 2021-2030 

Revision of the free 
allocation rules for 
2021-2030 

Adjustment to free 
allocation due to 
production changes 

Update of the 

Establishing the new Carbon Leakage List 
for phase 4 of the EU ETS based on the 
criteria for determining sectors significantly 
exposed to the risk of carbon leakage 

Revising Commission Decision 
2011/278/EU on  determining transitional 
union-wide rules for harmonised free 
allocation so as adapt it to the new legal 
context set for phase 4 
Defining the arrangements for the 
adjustment of the level of free allocation to 
installations on the basis of changing levels 
of operation of more than 15% upwards or 
downwards on average over a period of two 
years 
Determining updated benchmarks for 2021-

Type of legislative 
act 

Commission 
Delegated Decision 

Commission 
Delegated 
Regulation 

Commission 
Implementing 
Regulation 

Foreseen adoption 

Adopted on 15 
February 2019 and 
published in the 
Official Journal on 8 
May 201994 
Adopted on 19 
December 2018 and 
published in the 
Official Journal on 27 
February 201995 

Adopted on 31 
October 2019 and 
published in the 
Official Journal on 4 
November 201996 

Commission 

2020  

94https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2019:120:FULL&from=EN 
95https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R0331&from=EN 
96 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R1842&from=EN 

49 

 
 
 
 
                                                            
benchmark values for 
free allocation for 
2021-2025 

2025 on the basis of data submitted by 
Member States by 30 September 2019 for 
the years 2016 and 2017. 

Implementing 
Regulation 

Establishment of the 
Innovation Fund 

Determining the rules on the operation of 
the Innovation Fund, including the selection 
procedure and criteria 

Commission 
Delegated 
Regulation 

Establishment of the 
Modernisation Fund 

Determining the rules for the operation of 
the Modernisation Fund 

Commission 
Implementing 
Regulation 

Adopted on 26 
February 2019 and 
published in the 
Official Journal on 28 
May 201997 
Adopted on 9 July 
2020 and published in 
the Official Journal 
on 10 July 202098 

Revision of 
Regulation (EU) No 
389/2013 (the 
Registry Regulation) 

Amendment of 
Regulation (EU) No 
1031/2010 (the 
Auctioning 
Regulation) 

Revision of 
Regulation (EU) No 
1031/2010 (the 
Auctioning 
Regulation) 

Revision of 
Regulation N° 
601/2012 on 
Monitoring and 
Reporting 
Revision of 
Regulation N° 
600/2012 on 
Verification and 
Accreditation 
Regulation (EU) 
2019/1603 
supplementing 
Directive 2003/87/EC 
for the monitoring, 
reporting and 

Laying down the requirements for the Union 
Registry for phase 4 in the form of 
standardised electronic databases containing 
common data elements to track the issue, 
holding, transfer and cancellation of 
allowances, and to provide for public access 
and confidentiality 

Enabling the auctioning of the first 50 
million allowances for the Innovation Fund 
taken from the Market Stability Reserve 
(MSR) in 2020 

Revising some aspects of the auctioning 
process to implement requirements for 
phase 4, in particular to enable the 
auctioning of allowances for the Innovation 
Fund and the Modernisation Fund, as well 
as to reflect the classification of EU ETS 
allowances as financial instruments  under 
Directive 2014/65/EU on markets in 
financial instruments (MiFID2). 

Simplifying, improving and clarifying the 
monitoring and reporting rules and reducing 
administrative burden, based on 
implementation experience from phase 3 

Simplifying, improving and clarifying the 
accreditation and verification rules and 
reducing administrative burden to the extent 
possible, based on implementation 
experience from phase 3 
Supplementing the EU ETS Directive as 
regards measures adopted by the 
International Civil Aviation Organisation for 
the monitoring, reporting and verification of 
aviation emissions for the purpose of 
implementing CORSIA 

Commission 
Delegated 
Regulation 

Adopted on 12 March 
2019 and published in 
the Official Journal 
on 2 July 201999 

Commission 
Delegated 
Regulation 

Commission 
Delegated 
Regulation 

Commission 
Implementing 
Regulation 

Commission 
Implementing 
Regulation  

Commission 
Delegated 
Regulation 

Adopted on 30 
October 2018 and 
publsihed in the 
Official Journal on 4 
January 2019100 

Adopted on 28 
August 2019 and 
published in the 
Official Journal on 8 
November 2019101 

Adopted on 19 
December 2018 and 
published in the 
Offical Journal on 31 
December 2018102 
Adopted on 19 
December 2018 and 
publsihed in the 
Official Journal on 31 
December 2018103 

Adopted on 18 July 
2019 and published in 
the Official Journal 
on 30 September 
2019104 

97https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R0856&from=EN 
98 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020R1001&from=EN 
99 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R1122&from=EN 
100 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R0007 
101 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R1868&from=EN 
102 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R2066 
103 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R2067&from=EN 
104 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019R1603&from=EN 

50 

 
 
                                                            
Revising the EU ETS State Aid Guidelines 
for phase 4 to accommodate the new 
provisions introduced by the revised EU 
ETS Directive for indirect carbon cost 
compensation schemes 

Communication 
from the 
Commission 

2020 

Amends Annex I of the EU ETS Directive 
to exclude incoming flights from 
Switzerland from the EU emissions trading 
system as from 1 January 2020 

Commission 
Delegated 
Regulation 

Adopted on 18 May 
2020 and published in 
the Official Journal 
on 21 July 2020105 

verification of 
aviation emissions as 
regards CORSIA 

EU ETS State Aid 
Guidelines 2021-2030 

Commission 
Delegated Decision 
(EU) 2020/1071 on 
the exclusion of 
incoming flights from 
Switzerland from the 
EU emissions trading 
system 

State of play  
Planned 
Ongoing 
Done 

Appendix 7 

Table 7.1: Member State/ EEA EFTA state contributions  to the Market Stability Reserve in 2019-
2020(number of allowances) 

Member State/ EEA 
EFTA State 

MSR contributions 
2019106 

MSR contributions  
2020107 

Austria 

Belgium 

Bulgaria 

Croatia 

Cyprus 

5 935 748 

9 846 994 

8 292 720 

1 614 984 

932 844 

5 614 399 

9 313 899 

7 843 771 

1 527 552 

882 342 

Czech Republic 

15 406 858 

14 572 765 

Denmark 

Estonia 

Finland 

France 

Germany 

Greece 

Hungary 

Iceland 

Ireland 

5 340 750 

2 904 319 

7 130 025 

23 346 791 

85 389 770 

12 684 492 

5 115 708 

166 450 

3 991 393 

5 051 614 

2 747 085 

6 744 021 

22 082 847 

80 766 957 

11 997 782 

4 838 755 

157 439 

3 775 308 

105 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020D1071 
106 For the period January to August 2019, the figures are based on the Communication from the Commission C(2018) 2801 
final of 15.5.2018, available at  https://ec.europa.eu/clima/sites/clima/files/ets/reform/docs/c_2018_2801_en.pdf   
107 For the periods between September to December 2019 and January to August 2020, the figures are based on the 
Communication from the Commission C(2019) 3288 final, available at 
https://ec.europa.eu/clima/sites/clima/files/ets/reform/docs/c_2019_3288_en.pdf 

51 

 
 
 
 
 
 
                                                            
Italy 

Latvia 

Liechtenstein 

Lithuania 

Luxembourg 

Malta 

Netherlands 

Norway 

Poland 

Portugal 

Romania 

Slovakia 

Slovenia 

Spain 

Sweden 

United Kingdom 

Total 

Appendix 8 

40 304 729 

38 122 721 

865 501 

3 725 

1 792 324 

467 394 

354 798 

14 291 411 

3 314 570 

39 282 170 

6 478 775 

14 941 290 

4 752 513 

1 577 714 

32 660 234 

3 457 106 

44 480 623 

818 645 

3 524 

1 695 292 

442 090 

335 590 

13 517 705 

3 135 127 

37 155 520 

6 128 029 

14 132 401 

4 495 223 

1 492 300 

30 892 081 

3 269 946 

42 072 540 

397 124 722 

375 625 270 

Table 8.1: NER300 unspent funds under the InnovFin EDP and and CEF DI: supported projects in the 
period August 2019 to June 2020 

Project title 
VOLTALIS (EDP) 

STEELANOL (EDP): 
Advanced bio-fuel production 
from waste gas coming from  
steel-making 

EV Charging Italy (CEF DI) 

Description 
Voltalis  is  a  demand  response  aggregator  in  the  electricity  sector.  It  provides 
smart technical solutions to enable household loads and small commercial and 
industrial  loads  to  participate  in  energy  markets  and  unlock  their  flexibility 
potential. The project will improve security of supply, by reducing the risk of 
black-outs,  and  will  improve  energy  efficiency  by  reducing  overall  electricity 
consumption. Voltalis was awarded an EUR 20 million loan financed from the 
NER 300 unspent funds. 

The Steelanol operation received an EUR 75 million loan fully backed by NER 
300 unspent resources to support the demonstration of low carbon steelmaking. 
This  first-of-a-kind  project  aims  to  demonstrate  an  effective  pathway  for 
producing  bioethanol  from  wood  waste  feedstock  and  fully  integrate  it  into  a 
large-scale steel mill. It represents a major breakthrough in the decarbonisation 
of the sector.  

The project aims to develop electric vehicle charging infrastructure in Italy. It 
will  involve  the  installation  of  approximately  6  850  charging  points  and  the 
associated connections to the distribution network over the period 2019-2023. 
The  financing  of  the  project  amounts  to  EUR  25  million  fully  backed  by  the 
NER 300 unspent funds. 

52 

 
 
 
Hamburger Hochbahn E-
mobility programme (CEF DI) 

VHH Hamburg e-mobility 
programme (CEF DI) 

LIGNOL (PDA) 

Solar Thermo Electric Magaldi 
(PDA) 

BIOFOREVER  (PDA) 

This project by Hamburger Hochbahn, a public transport operator in Hamburg, 
aims  to  renew  and  electrify  Hamburg’s  urban  public  transport  fleet  with  the 
replacement of current diesel buses by 100 e-buses and the deployment of the 
related  charging  infrastructure.  The  project  promoter  uses  100%  certified 
renewable  energy  for  its  e-buses.  The  company’s  strategy  foresees  that  the 
charging  infrastructure  should be  modular  and  scalable,  easy  to  maintain,  and 
highly energy and cost-efficient. 

This  project  supports  VHH,  a  public  transport  operator  in  Hamburg,  in 
purchasing approximately 155 e-buses to substitute old diesel buses and build 
the associated charging infrastructure. It includes the adaptation of four depots 
to  electro  mobility  and  the  construction  of  one  new  depot  adapted  to  electric 
buses,  as  well  as  the  implementation  of  software  and  IT  systems.  The  project 
promoter uses 100% certified renewable energy. 

This  project  supports  the  building  of  a  Lignol  production  plant  at  an  existing 
pulp mill in Mörrum, Sweden, which is expected to produce approximately 185 
000  tons  of  Lignol  (a  renewable,  lignin-based  bio-oil,  mixable  in  combustion 
engines  to  any  degree  and  suitable  for  blending  with  aviation  fuel)  annually. 
Besides  reducing  CO2  emissions  from  the  Swedish  transport  sector,  the 
production process for Lignol is highly energy efficient and does not produce 
toxic emissions or harmful waste products. The estimated demonstration costs 
amount to EUR 105.5 million. 

This project, based in Italy, supports a first-of-a-kind plant based on a new solar 
thermal  generation  and  storage  concept  and  generating  green  electricity 
dispatchable on demand. The plant will offer continuous electrical supply from 
renewables  without  the  need  to  build  long  transmission  lines,  displacing  the 
cost  of  thermal  plants  running  on  heavy  fuel  oil  or  diesel.  The  total  power 
generated  annually  from  the  plant  is  expected  to  be  about  14300  MWh/year. 
Costs are currently estimated to some EUR 36 million. 

This project supports a demonstration-scale wood-to-ethanol biorefinery based 
in  Rotterdam,  producing  8  000  tonnes  of  ethanol  per  year.  The  input  to  the 
production  process  will  be  wood  waste  of  grades  A  or  B.  The  output  of  the 
production process will be ethanol for biofuels. The demosntration costs of the 
project are estimated at EUR 30 million. 

53