REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the functioning of the European carbon market in 2023
Date: 2024-11-19
Institutions: Directorate-General for Climate Action, European Commission
Subjects: EU Emissions Trading Scheme, EU emission allowance, EU energy policy, EU environmental policy, air transport, carbon, environmental monitoring, greenhouse gas, maritime transport, reduction of gas emissions

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 19.11.2024  COM(2024) 538 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the functioning of the European carbon market in 2023 {SWD(2024) 264 final}  
 
 
Contents 
1. 

Introduction ..................................................................................................................................... 2 

2.  State of play on the EU ETS ........................................................................................................... 3 

2.1. 

2.2. 

Scope and coverage ................................................................................................................. 3 

ETS2 - the new emissions trading system for buildings, road transport and additional sectors
………………………………………………………………………………………………..4 

2.3. 

Social Climate Fund ................................................................................................................ 4 

3.  Cap on emissions ............................................................................................................................ 5 

4.  Auctioning of allowances................................................................................................................ 8 

5.  Free allocation of allowances ........................................................................................................ 10 

5.1.  Carbon Border Adjustment Mechanism  .............................................................................. 12 

5.2.  Carbon leakage risk for goods produced by CBAM sectors in the EU for export ................ 12 

6.  EU carbon market ......................................................................................................................... 15 

6.1.  Balancing supply and demand .............................................................................................. 15 

6.2.  Voluntary cancellation .......................................................................................................... 16 

6.3.  Market oversight ................................................................................................................... 17 

7.  Emission trends ............................................................................................................................. 19 

8.  Revenues from the EU ETS .......................................................................................................... 22 

8.1.  Aid for indirect costs ............................................................................................................. 26 

8.2. 

8.3. 

8.4. 

ETS Innovation Fund ............................................................................................................ 29 

ETS Modernisation Fund ...................................................................................................... 31 

ETS Decarbonisation Fund for Greece ................................................................................. 33 

9.  Aviation ......................................................................................................................................... 33 

10.  Maritime transport .................................................................................................................... 37 

11. 

EU ETS implementation framework ......................................................................................... 38 

11.1.  Monitoring and reporting of emissions ............................................................................. 39 

11.2. 

11.3. 

11.4. 

11.5. 

Verification and Accreditation .......................................................................................... 40 

Guidance documents ......................................................................................................... 42 

National competent authorities ......................................................................................... 42 

Compliance with the EU ETS ........................................................................................... 43 

12. 

13. 

14. 

EU ETS in the context of the EU’s climate and energy governance ......................................... 45 

Link between the EU ETS and the Swiss ETS ......................................................................... 45 

Summary ................................................................................................................................... 49 

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1.  Introduction  

The European Union’s  Emissions Trading  System (EU ETS) is  a cornerstone of its climate 
policy, designed to bring down emissions cost-effectively. It puts a cap and a price on emissions 
from the energy, industry, maritime transport and aviation sectors in Europe, which account 
for approximately 40% of the EU’s total emissions.  

The  cap  ensures  that  emissions  go  down  over  time  and  the  carbon  price,  determined  by  
the market, provides an incentive for companies to reduce emissions where it costs least to do 
so. The carbon price also determines the revenue that the EU ETS generates for investment in 
climate action and energy transformation. 

Since its launch in 2005, the EU ETS has helped drive down emissions from electricity and 
heat generation and industrial production by 47%1, while generating over EUR 200 billion in 
auction revenue.  

In 2023, emissions from these sectors have seen the highest annual decrease to date, of 16.5% 
compared to 2022, driven largely by the accelerated deployment of renewable energy sources 
in the power sector facilitated by a sustained robust carbon price signal.  

The  total  revenue  of  nearly  EUR 44 billion  generated  by  the  EU  ETS  in  2023  has  gone 
primarily to Member States’ budgets, but also to the Innovation and Modernisation Funds as 
well as to the Resilience and Recovery Facility’s budget for the REPowerEU plan2.  

Further effort is needed, however, both to reduce emissions and to transform the EU’s economy 
in line with European Climate Law targets3 and European Green Deal objectives. On the way 
to climate neutrality by 2050, the EU has committed to reducing emissions by at least 55% by 
2030 compared to 1990 levels. The EU ETS was revised in 2023 to this end, as part of the ‘Fit 
for 55’ package of reforms. The revision is now fully in force and the Commission and Member 
States have been working on its implementation.  

This report takes stock of the functioning of the EU ETS in 2023 and the first half of 2024, 
including  the  implementation  of  the  2023  revision.  It  recaps  the  legislative  work  of  
the Commission, provides an updated overview of key elements of the system’s framework 
and compiles annual developments such as emission and auction revenue trends.  

1 ETS emissions from installations in the power and industry sectors in 2023, without the UK, only the power sector in Northern 
Ireland, compared to an adjusted value of 2005 ETS emissions observing the same scope. Based on the European Environment 
Agency ETS data viewer, extracted on 20 August 2024.  

2 See Commission’s website The Recovery and Resilience Facility and REPowerEU - Affordable, secure and sustainable 
energy for Europe for further information. 

3 Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for 
achieving climate neutrality and amending Regulations (EC) No 401/2009 and (EU) 2018/1999 (OJ L 243, 9.7.2021) 

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The report is  adopted in line with  Articles 10(5) and 21(2) of  the  ETS  Directive  (Directive 
2003/87/EC)4. It is based mostly on data from the Union Registry, the EU Transaction Log 
(EUTL) and Member State reporting.  

The report is accompanied by a staff working document (Technical information). 

2.  State of play on the EU ETS 

2.1. Scope and coverage 

The EU ETS applies in all 27 EU Member States plus Iceland, Liechtenstein and Norway, as 
well as to electricity generation plants in Northern Ireland5. Since January 2020, the EU ETS 
is also linked with Switzerland’s emissions trading system (Swiss ETS).  

Until 2023, the scope of the EU ETS extended to emissions from electricity and heat generation 
plants and manufacturing installations  in Europe and from aircraft operators flying between 
airports  in  the  European  Economic  Area  (EEA)  and  from  the  EEA  to  Switzerland  and  to  
the UK.  

As of 1 January 2024, the EU’s fair share of CO2 (carbon dioxide) emissions from maritime 
transport has also been included in the EU ETS (see Chapter 10). The EU ETS’ extension to 
maritime transport covers all emissions occurring between two EEA ports and when ships are 
in EEA ports, and only half of emissions from voyages starting or ending outside the EEA.  

From 1 January 2024, installations for the incineration of municipal waste must monitor and 
report  their  emissions  under  the  EU  ETS.  They  are  not,  however,  required  to  surrender 
allowances for their emissions. In 2026, the Commission will assess the feasibility of extending 
the scope of the EU ETS to emissions from municipal waste incineration as well as emissions 
from other waste management processes, such as landfilling. In the meantime, emissions from 
waste treatment are subject to national reduction targets under the Effort Sharing Regulation 
(Regulation 2018/842)6. 

Information about installations and aircraft operators in the EU ETS (as it stood in 2023) can 
be found in Section I of the accompanying staff working document.   

4  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) 

5 Under the Protocol on Ireland/Northern Ireland of the EU-UK Withdrawal Agreement. 

6 Regulation (EU) 2018/842 of the European Parliament and of the Council of 30 May 2018 on binding annual greenhouse 
gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the 
Paris Agreement and amending Regulation (EU) No 525/2013 (OJ L 156, 19.6.2018) 

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2.2. ETS2  -  the  new  emissions  trading  system  for  buildings,  road  transport  and 

additional sectors 

As part of the 2023 revision of the ETS Directive, a new and separate emissions trading system 
for emissions from fuel combustion in buildings, road transport and additional sectors (ETS2) 
was created. Although it will be a ‘cap and trade’ system like the existing EU ETS, ETS2 will 
cover emissions upstream. This means that fuel suppliers will be required to monitor and report 
the quantities of fuels that they release for consumption in the sectors that fall under the scope 
of ETS2, and to buy and surrender the allowances for the corresponding emissions. Entities 
falling  under ETS2  are required to  hold  a  greenhouse gas (GHG)  emissions  permit  as  from 
1 January 2025 as well as an approved monitoring plan for the monitoring and reporting of 
their annual emissions. The obligation to surrender allowances will start in 2027 (or in 2028 in 
the event of exceptionally high gas or oil prices in 2026).  

The  monitoring  and  reporting  requirements  of  ETS2  regulated  entities  have  been  set  out  in 
detail  in  the  revised  Monitoring  and  Reporting  Regulation  (Implementing  Regulation 
2018/2066)7,  adopted  on  17 October  2023.  The  Commission  also  published  a  guidance 
document on the revised Regulation8.  

2.3. Social Climate Fund 

The Social Climate Fund (SCF) was created alongside ETS29 to provide Member States with 
funding to support the most vulnerable groups in the green transition, such as households in 
energy or transport poverty10. The Fund will make EUR 65 billion available over 2026-2032, 
initially financed from the externally assigned revenue from the auctioning of ETS2 allowances 
as well as from the auctioning of 50 million allowances from the existing EU ETS. This budget 
will be distributed among Member States according to an allocation key. Member States will 
spend  their  SCF  resources  in  line  with  their  national  social  climate  plans.  Including  
the mandatory 25% contribution by Member States to their plans, the SCF should mobilise at 
least EUR 86.7 billion.  

All Member States should submit their plans to the Commission by 30 June 2025. The plans 
should include an analysis of the likely effects of ETS2 on vulnerable groups. And to mitigate 
those effects, it should set out structural measures and investments in energy efficiency and 
renovation of buildings, in clean heating and cooling and integration of renewable energy, as 
well as in zero- and low-emission mobility solutions, including public transport. Member States 

7 Commission Implementing Regulation (EU) 2023/2122 of 17 October 2023 amending Implementing Regulation (EU) 
2018/2066 as regards updating the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC 
of the European Parliament and of the Council (OJ L, 2023/2122, 18.10.2023). See consolidated version. 

8 See Commission’s website ETS2: buildings, road transport and additional sectors for further information. 

9 Regulation (EU) 2023/955 of the European Parliament and of the Council of 10 May 2023 establishing a Social Climate 
Fund and amending Regulation (EU) 2021/1060 (OJ L 130, 16.5.2023) 

10 See Commission’s website Social Climate Fund for further information.  

4 

 
 
 
will  also  have the option of spending  part of their SCF budget on temporary direct  income 
support.   

The Commission and Member States are taking the appropriate steps to implement the SCF. 
To collaborate more efficiently, the Commission has set up an SCF formation under the expert 
group  on  climate  change  policy  (CCEG-SCF).  Through  the  CCEG-SCF,  the  Commission 
launched an exchange on good practices on the cost-effective measures and investments that 
could be financed by the Fund and on the public consultation of the plans. The Commission is 
also  directly  supporting  10  Member  States  in  the  preparation  of  their  plans  through  
the Technical Support Instrument11.  

In parallel, the Commission is working on a guidance on how to apply the ‘do no significant 
harm’ (DNSH) principle to the measures and investments financed by the SCF. In line with  
the  DNSH  principle,  the  SCF  can  only  support  measures  and  investments  that  do  not 
significantly harm any of the environmental objectives within the meaning of Article 17 of the 
Taxonomy  Regulation  (Regulation  2020/852)12.  These  objectives  are  climate  change 
mitigation  and  adaptation,  sustainable  use  and  protection  of  water  and  marine  resources, 
circular  economy,  pollution  prevention  and  control,  and  the  protection  and  restoration  of 
biodiversity and ecosystems.  

The draft DNSH guidance was put forward for a 2-month public consultation, which ran from 
June 2024 to August 202413. It will be adopted and published together with a general guidance 
document on the SCF and social climate plans (SCF guidance) by the new Commission. In  
the meantime, the Commission  is  following up on SCF-related questions from the Member 
States. 

3.  Cap on emissions 

The cap in the EU ETS sets the maximum absolute volume of emissions that regulated entities 
can emit over a trading phase. It corresponds to the number of allowances issued for that period, 
where  one  allowance  corresponds  to  one  tonne  of  CO2eq  (carbon  dioxide  equivalent) 
emissions. The cap decreases annually to ensure that the EU meets its overarching emission 
reductions  target.  This  also  gives  companies  in  the  EU  ETS  certainty  about  the  expected 
scarcity of supply of allowances.  

Separate cap calculations apply to emissions from  electricity and heat generation, industrial 
production and  maritime transport and  from  aviation in  the scope of the  EU ETS.  In 2023, 
1 485 575 977  allowances  were  issued  for  electricity  and  heat  generation  and  industrial 

11 The ten Member States include Belgium, Czechia, Denmark, Greece, Finland, Croatia, Lithuania, Latvia, Romania and 
Slovakia.  

12 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a 
framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020) 

13 See Commission’s website Consultation on the application of the “DNSH” principle under the Social Climate Fund for 
further information. The consultation closed on 23 August 2024.  

5 

 
 
 
production,  while  26 341 779  allowances  were  issued  for  aviation.  Maritime  transport  is 
included in the cap calculations from 2024 onward. 

In  2021-2023,  the  cap  decreased  at  a  rate  of  2.2%  per  year.  For  the  cap  calculation  for 
installations in the electricity and heat generation and industrial manufacturing sectors, this was 
equivalent to 43 003 515 allowances per year. Table 1 shows the total quantities of allowances 
issued for the different sectors under the EU ETS cap.  

Table 1. EU ETS cap (2021-2024). Separate cap calculations apply to (i) emissions from electricity and 
heat generation, industrial production and from 2024 onwards maritime transport, and (ii) emissions 
from aviation in the scope of the EU ETS. 

Year 

2021 

2022 

2023 

2024 

Total quantity of allowances for electricity and heat 
generation, industrial production and maritime 
transport 

Total quantity of allowances for 
aviation   

1 571 583 007 

1 528 579 492 

1 485 575 977 

1 386 051 745 

28 306 545 

27 268 379 

26 341 779 

27 563 52914 

With  the  2023  revision  of  the  ETS  Directive,  the  overall  cap  has  been  set  to  bring  down 
emissions by 62% by 2030, compared to 2005. The first cap adjustments to this end took effect 
in  2024  and  are  reflected  in  the  decision  (Commission  Decision  2023/1575)15  adopted  on 
27 July 2023.  

The cap for 2024 has been reduced by 90 million allowances and the reduction rate has been 
increased to 4.3% per year for the period 2024-2027, equivalent to 87 924 231 allowances per 
year. These adjustments already recognise that emissions from maritime transport have been 
included  in  the  EU  ETS  from  2024.  The  2024  cap  has  been  calculated  at  1 386 051 745 
allowances. 

Figure 1 illustrates changes in the cap throughout all EU ETS phases, including the forthcoming 
adjustments. 

14 From 1 January 2024, the scope of the EU ETS for aviation also extends to emissions from most flights between the EEA 
and  EU’s  nine  outermost  regions  as  well  as  departing  flights  from  the  outermost  regions  to  Switzerland  and  the  UK  (see 
Chapter 9). The total quantity of allowances for aviation reflects the extended scope of the EU ETS for aviation.  

15 Commission Decision (EU) 2023/1575 of 27 July 2023 on the Union-wide quantity of allowances to be issued under the EU 
Emissions Trading System for 2024 (OJ L 192, 31.7.2023) 

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Figure 1. Emissions cap in the EU ETS compared with verified emissions. The figure considers the 2023 revision of the ETS Directive, i.e. rebasing of the cap 
in 2024 and 2026, including the maritime transport sector in the EU ETS from 2024 and the linear reduction factor of 4.3% in 2024-2027 and 4.4% from 2028. 
Aviation is not included. Due to changes in scope, the 2005-2007 figures are not directly comparable with the latest ones. From 2021, the EU ETS no longer 
covers installations in the UK, only electricity generators in Northern Ireland. Legend: bars (cap), light shaded bars in 2014-2016 (allowances backloaded 
from auctions), light shaded bars from 2019 (feeds of allowances to the Market Stability Reserve), dark shaded bars from 2024 (maritime scope extension), 
dashed line (verified emissions).  

7 

 
 
 
 
4.  Auctioning of allowances 

Auctioning is the main method of distributing allowances in the EU ETS, accounting for up to 
57% of the cap16. The Auctioning Regulation (Regulation 1031/2010)17 sets rules to ensure that 
auctions  take  place  in  an  open,  transparent,  harmonised  and  non-discriminatory  way.  It 
specifies the timing, administration and other aspects of auctioning emission allowances.  

In 2023, auctions continued to take place through the European Energy Exchange AG (EEX):  

•  as  the  common  auction  platform  for  the  25  Member  States  participating  in  a  joint 

procurement procedure;  

• 

• 

for Poland, which opted out of the joint procurement procedure but has not appointed 
its own auction platform; 

for Iceland, Liechtenstein, and Norway, after the EEA Agreement was amended in 2019 
to allow them to participate in the Joint Procurement Agreement for the common auction 
platform;  

• 

for the UK to auction allowances for electricity generation plants in Northern Ireland.  

The EEX also auctioned allowances for Germany as their ‘opt-out’ auction platform.  

Table 2 provides an overview of the annual volumes of allowances auctioned by the EEX since 
2021. 

Table 2. Total volumes of allowances auctioned (from 1 January 2021 to 30 June 2024) 

Year 

2021 

2022 

2023 

2024  
(until 30 June) 

General allowances 

Aviation allowances 

582 952 500 

482 389 000 

517 587 000 

281 107 000 

3 785 500 

3 698 000 

5 720 500 

2 718 000 

In total, 223 auctions were held in 2023 and 106 auctions were held in the first half of 2024. 
No auctions were cancelled.  

16  In practice,  the  exact  share varies  as  the  volume of  allowances  auctioned  has been  reduced  to  contribute  to  the  Market 
Stability Reserve, while the volume of allowances earmarked for free allocation has not changed. 

17  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) 

8 

 
 
 
As of July 2023, auction volumes include allowances allocated to the Recovery and Resilience 
Facility  (RRF)  under  the  REPowerEU  Regulation  (Regulation  2023/435)18.  Allowances 
auctioned  under  the  REPowerEU  Regulation  will  raise  EUR 20 billion  for  the  Facility  by 
31 August 202619. Member States will use these additional RRF resources to carry out further 
reforms and make investments to advance the clean energy transformation and boost energy 
security.  In  2023  and  the  first  half  of  2024,  over  EUR 5.5 billion  was  raised  for  the  RRF  - 
REPowerEU  (with  35 325 000  allowances  auctioned  in  2023  and  42 124 500  allowances 
auctioned in the first half of 2024). 

Figure 2 gives an overview of auction clearing prices in the EU carbon market in  2023 and  
the  first  half  of  2024.  The  highest  auction  price  in  2023  of  EUR 96.33  was  reached  on 
28 February. The lowest price of EUR 66.49 was recorded at the last auction of the year, on 
18 December, reflecting the general downward trend in the second half of the year. The average 
price in 2023 was EUR 83.60, up from EUR 80.18 in 2022. In the first half of 2024, the price 
varied between EUR 49.50 (23 February) and EUR 75.35 (3 June). 

The  auction  platform  regularly  publishes  detailed  results  of  each  auction  on  its  website20. 
Further information on the performance of auctions, including the participation, cover ratios 
and prices, can be found in the ETS countries’ auction reports21. 

Figure 2. Clearing prices in auctions of general allowances (from 1 January 2023 to 30 June 2024) 
[EUR/tonne CO2] 

18 Regulation (EU) 2023/435 of the European Parliament and of the Council of 27 February 2023 (OJ L 63, 28.2.2023) 

19 Regulatory update, Revised 2023 auction calendar published, DG Climate Action, 23.7.2023 

20 EEX, EU ETS Auctions 

21 Auction reports, DG Climate Action, 30.6.2024 

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5.  Free allocation of allowances 

While auctioning is the primary method for distributing allowances in the EU ETS, a significant 
volume  of  allowances  is  allocated  to  installations  for  free  to  address  the  risk  of  carbon 
leakage22. Free allocation, however, is a transitional measure primarily addressed to industry 
sectors.  

A dedicated carbon leakage list identifies sectors at risk of carbon leakage, eligible to receive 
free allocation. The list for 2021-2030 identifies 63 sectors and sub-sectors covering about 94% 
of industrial emissions in the EU ETS23.  

Free  allocation  to  specific  sectors  is  based  on  performance  benchmarks,  which  reflect  an 
average emissions intensity per unit of product of the 10% most efficient installations in each 
sector.  For  emissions  beyond  those  benchmark  values,  allowances  have  to  be  bought  on  
the  market.  Benchmarks  are  also  reduced  incrementally  to  strengthen  the  incentive  for  the 
sector to decarbonise and advance innovation.  

In 2021, the Commission updated the benchmark values for the first allocation period, 2021-
202524.  The  benchmarks  will  be  updated  for  the  second  allocation  period  (2026-2030). 
According to the revised ETS Directive, the annual reduction rates will then be increased to 
stimulate further industrial transformation. The minimum rate will increase from 0.2% to 0.3% 
per year and the maximum rate from 1.6% to 2.5% per year. The applicable annual reduction 
rate will be determined specifically for each benchmark.  

Since  2021,  volumes  of  free  allocation  are  being  adjusted  when  changes  in  industrial 
production  occur25.  The  threshold  for  adjustments  is  set  at  15%  increasing  or  decreasing 
production.  Operators  are  required  to  submit  yearly  reports  on  production  data  to  national 
competent  authorities,  based  on  which  adjustments  may  be  made  to  the  volumes  of  free 
allocation  issued.  This  added  stringency  has  led  to  an  increase  in  the  number  of  yearly 
adjustments to the free allocation. The average number of applications per year submitted in 
2021-2023 was over 3 800, around three times more than the yearly average up to 2020.  

Initially,  the  total  free  allocation  for  2021-2025  had  been  calculated  at  2 791 million 
allowances, for 7 430 installations. Assuming a carbon price of EUR 75/tCO2, the value of this 
allocation would amount to about EUR 42 billion every year during this period. By mid-2024, 

22  Carbon  leakage  could  occur  if  ETS-regulated  activities  were  moved  to  non-EU  countries  with  less  ambitious  climate 
policies, leading to an increase in overall greenhouse gas emissions. 

23 Commission Delegated Decision (EU) 2019/708 of 15 February 2019 supplementing Directive 2003/87/EC of the European 
Parliament and of the Council concerning the determination of sectors and subsectors deemed at risk of carbon leakage for the 
period 2021 to 2030 (OJ L 120, 8.5.2019) 

24 Commission Implementing Regulation (EU) 2021/447 of 12 March 2021 determining revised benchmark values for free 
allocation of emission allowances for the period from 2021 to 2025 pursuant to Article 10a(2) of Directive 2003/87/EC of the 
European Parliament and of the Council (OJ L 87, 15.3.2021) 

25  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) 

10 

 
 
 
the  Commission  adopted  12 decisions  to  adjust  free  allocation  volumes  due  to  changes  in 
industrial  production  volumes,  resulting  in  a  reduction  by  116.8 million  allowances26.  In 
parallel, however, the Commission adopted five decisions correcting the initial level of free 
allocation, adding 4.6 million allowances27. This was necessary due to errors found in the data 
submitted  by  installations.  Overall,  the  free  allocation  for  2021-2025  has  been  reduced  by 
112.2 million allowances thus far compared to the initial total free allocation.   

Adjustments to the level of free allocation are made from the New Entrants’ Reserve (NER). 
These adjustments also include changes in allocation due to installations opening or closing. 
The initial volume of the NER at the start of 2021 amounted to 331.3 million allowances. This 
included  unallocated  allowances  and  200 million  allowances  from  the  Market  Stability 
Reserve.  

Table 3 summarises  the annual  levels  of free allocation in  the first allocation period  – both 
initial and adjusted levels.  

Table 3. Free allocation under the EU ETS (2021-2025) [million allowances]. Data extracted from the 
EU Registry on 30 June 2024.  

Year  

2021 

2022 

2023 

2024 

2025 

Total 

Initial free allocation 
(EU-27 + Iceland, 
Liechtenstein  
and Norway)  

559.6 

558.9 

558.2 

557.5 

556.8 

2 791.1 

Actual free allocation  

545.9 

542.5 

537.3 

527.0 

526.2 

2 678.9 

Adjusted and corrected 
free allocation  

-13.7 

-16.4 

-20.9 

-30.5 

-30.6 

-112.2 

The revision of the ETS Directive aligns the rules on free allocation with the strengthened EU 
ETS. The scope of the activities regulated by the system and benchmarks has been broadened 
to encourage the deployment of new technologies such as green hydrogen or hydrogen-based 
steel. In parallel, conditionality requirements have been introduced to access free allocation. 
These take the form of energy audits and for certain installations, climate neutrality plans.  

To  implement  the  2023  revision  of  the  ETS  Directive,  a  revision  of  the  Free  Allocation 
Regulation  (Delegated  Regulation  2019/331)  was  adopted  in  January  202428.  The  revision 
introduces additional improvements based on the experienced gained over the first  years of  
the current allocation period. The main changes include the introduction of the free allocation 

26 The European Free Trade Agreement Surveillance Authority also adopted Decisions for Iceland, Liechtenstein, and Norway. 

27 The European Free Trade Agreement Surveillance Authority also adopted Decisions for Iceland, Liechtenstein, and Norway. 

28 Commission Delegated Regulation (EU) 2024/873 of 30 January 2024 amending Delegated Regulation (EU) 2019/331 as 
regards transitional Union-wide rules for harmonised free allocation of emission allowances, (OJ L, 2024/873, 4.4.2024). See 
consolidated text. 

11 

 
 
 
conditionality and the gradual phase-out of free allocation for some products corresponding to 
the phase-in  of the Carbon Border Adjustment Mechanism (CBAM).  In addition,  to  further 
incentivise emission reductions and to ensure a level playing field between conventional and 
new  technologies,  some  product  benchmark  definitions  have  been  modified,  notably  those 
related to hydrogen and steel production. Adjustments have also been made to other aspects of 
the Free Allocation Regulation to incentivise the electrification of industrial processes.   

5.1. Carbon Border Adjustment Mechanism  

As  part  of  the  Fit  for  55  package,  the  Carbon  Border  Adjustment  Mechanism  (CBAM) 
Regulation (Regulation 2023/956)29 was adopted to mitigate the risk of carbon leakage while 
the EU strengthens its climate action.  

In certain EU ETS-covered industry sectors (cement, aluminium, fertilisers, hydrogen, iron and 
steel),  the  CBAM  will  gradually  replace  free  allocation  from  2026  onwards.  These  sectors 
represent approx. 54% of total free allocation in 2021-2025. As of 2026, importers of goods in 
CBAM  sectors  to  the  EU  will  need  to  buy  and  surrender  certificates  for  the  embedded 
emissions.  To  support  industry  in  their  decarbonisation  efforts,  the  ETS  Directive  directs 
proceeds  from  the  auctioning  of  phased-out  free  allowances  to  the  Innovation  Fund  (see 
Chapter 8.2), giving special attention to projects in CBAM sectors. 

By ensuring that an equivalent price is paid for the embedded carbon emissions generated in 
the production of certain goods imported into the EU, the CBAM will ensure the carbon price 
of imports is equivalent to the carbon price of domestic production (under the EU ETS), and 
that the EU's climate objectives are not undermined. The CBAM will cover direct emissions 
for all  covered sectors and indirect  emissions (from electricity consumed during production 
processes)  for  cement  and  fertilisers.  Indirect  emissions  will  not  initially  be  considered  for  
the sectors eligible for the indirect carbon cost aid (i.e. aluminium, hydrogen, iron and steel – 
see Chapter 8.1).  

A transitional period, during which importers report emissions but are not yet required to make 
payments, began in October 2023 and will run until the end of 2025, before the new regime is 
gradually phased in. 

5.2. Carbon leakage risk for goods produced by CBAM sectors in the EU for export  

Goods produced in the EU in CBAM sectors for export might face a competitive disadvantage 
on third-country markets, if they compete with goods that are not subject to equivalent carbon 
pricing.  Under  Article  10a(1a)  of  the  ETS  Directive,  as  part  of  its  annual  report  on  
the functioning of the European  carbon market  (this  report), the Commission  is  required to 
assess the carbon leakage risk for goods produced by CBAM sectors in the EU and exported 
to third countries that do not apply the EU ETS or a similar carbon pricing mechanism.  

29 Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border 
adjustment mechanism (OJ L 130, 16.5.2023) 

12 

 
 
 
The  Commission  launched  its  assessment  in  Q3-202430,  and  this  report  includes  the  initial 
findings. The choice of metric and methodology will be further refined for future assessments 
to  monitor  the  potential  risk  of  carbon  leakage  in  a  way  that  can  be  updated  over  time31.  
The initial findings cannot be considered definitive since CBAM is still in its transitional phase. 
However,  the  Commission  will  continue  to  assess  the  carbon  leakage  for  exports  during  
the  gradual  phase-in  of  CBAM  (and  phase-out  of  free  allocation)  as  required  by  the  ETS 
Directive and the CBAM Regulation. 

Once the analytical work is completed, the updated results will be published, based on a broader 
range  of  indicators,  qualitative  analyses  and  feedback  from  stakeholders.  Additional 
assessments will cover the role and accelerated uptake of hydrogen as well as developments 
related to trade flows and the embedded emissions of goods produced by CBAM sectors on  
the global market. The Commission will continue to assess the issue of carbon leakage risk for 
exports as CBAM enters its definitive phase, and report on it before January 2028 as required 
by Article 30(6) of the CBAM Regulation.  

The  initial  assessment  focused  on  the  comparison  of  the  emission  intensity  in  the  EU 
(expressed in kg CO2eq per EUR of their production value)32 and export intensity (export value 
divided  by  the  sum  of  production  value  and  import  value)33.  Figure  3  compares  the  two 
indicators at 8-digit (CN) level34. The higher the export intensity and the emission intensity of 
a  CBAM  good,  the  more  sensitive  exports  of  that  good  are  to  increased  carbon  prices  and  
the more vulnerable it may be to a potential carbon leakage risk in case of relevant effective 
carbon price differences with third countries. 

The size of the bubbles in Figure 3 represents the combined value of multiplying the export 
intensity with the emission intensity for each of the CBAM goods. This combined indicator 
value  at  the  8-digit  level  may  provide  an  overall  indication  of  the  sensitivity  of  exports  to 
carbon pricing. It is, however, not directly comparable to the carbon leakage indicator (CLI) 

30 Contract reference CLIMA/A4/FWC/2023/0002/RICARDO 

31 This assessment will not change the outcome of the assessment to determine the 2021-2030 carbon leakage list at the 4-digit 
NACE code level. 

32 Emission intensity values were taken from Joint Research Centre (2023) Greenhouse gas emission intensities of the steel, 
fertilisers, aluminium and cement industries in the EU and its main trading partners and Estimation of the global average GHG 
emission intensity of hydrogen production. These values for CBAM goods for both direct and indirect emissions were then 
multiplied by the 2019 data from PRODCOM on the production volume sold and divided by the 2019 data from PRODCOM 
on  the  production  value  sold.  The  GHG  intensity  value  for  hydrogen  was  calculated  based  on  2021  data.  
The  author  confirmed  that  the  value  was  not  expected  to  change  significantly  so  it  was  assumed  in  the  assessment  that  
the same value would apply for 2019. 

33 For production, import and export values 2022 data from PRODCOM was used.  

34 Further information will be necessary, for example, on trade patterns with third countries and the CO2 pricing applied abroad, 
before  more  definitive  conclusions  can  be  reached  on  the  carbon  leakage  risk  status  of  the  goods  covered  by  
the CBAM.  

13 

 
 
 
used to determine the 2021-2030 carbon leakage list, which is more aggregated (4-digit level) 
and not focused specifically on exports35. Initial insights from the preliminary results include: 

•  No  product  falls  into  the  quadrant  of  being  both  emission  –  and  export-intensive. 
Products that are very emission-intensive are little traded. And all products with high 
export intensity have a relatively low emission intensity. 

•  The  emission  intensity  of  hydrogen  (grey  circle)  is  relatively  high,  but  the  export 
intensity of hydrogen is very low resulting in a low combined indicator value of 0.013. 
However, with the uptake of hydrogen produced with renewable energies these trends 
could reverse depending on how the market for renewable hydrogen develops.  

•  Goods from the cement sector (orange circles) are less frequently traded. The cement 
clinker  -  an  emission-intense  input  product,  however,  is  shipped  more  easily  than 
cement. This warrants further investigation as it currently has a high combined indicator 
value of 2.109.  

•  Many  fertilisers  (yellow  circles),  aluminium  (green  circles)  and  steel  goods  (blue 
circles) have lower emission intensity values than hydrogen and cement goods but are 
much more frequently exported and therefore, this results in relatively high combined 
indicator values.  

The combined indicator values for a selection of CBAM products from each of the industrial 
sectors covered are provided for illustrative purposes only. No threshold value has been set to 
limit  the  scope  of  CBAM  goods  to  be  both  quantitatively  and  qualitatively  assessed  for 
potential carbon leakage risk. 

35 The combined indicator values at the 8-digit level are lower than the CLI values calculated at the 4-digit level as the trade 
intensity  only  relates  to  exports  and  gross  value  added  (GVA)  data  is  replaced  by  production  value  (which  is  lower  in 
comparison) and therefore the threshold value of 0.2 that was applied in the 2021-2030 carbon leakage list to determine sectors 
or sub-sectors at risk of carbon leakage cannot be directly applied to the combined indicator values calculated for CBAM 
goods at the 8-digit level.  

14 

 
 
 
Figure 3. Comparison of the export intensity and the emission intensity values of CBAM goods 

6.  EU carbon market  

6.1. Balancing supply and demand 

The  Market  Stability  Reserve  (MSR)  is  a  rule-based,  long-term  solution  to  a  structural 
imbalance  between  the  supply  of  and  demand  for  allowances  in  the  EU  carbon  market  at  
the start of phase 3. In 2013, the market had a surplus of 2.1 billion allowances, which the MSR 
has since helped reduce. The Reserve also improves market balance in the short-term, therefore 
making it more resilient to sudden supply-demand shocks, for example due to the economic 
downturn caused by the COVID-19 pandemic in 2020.  

The  MSR  adjusts  the  supply  of  allowances  to  the  EU  carbon  market  according  to  pre-set 
thresholds of the total number of allowances in circulation (TNAC). Based on the level of the 
TNAC, allowances are either withdrawn from auctions and placed in the Reserve or released 
from the Reserve and auctioned. This way, the MSR fosters balance and resilience to supply-
demand  shocks,  allowing  the  EU  carbon  market  to  function  smoothly.  The  Reserve  began 
operating in 2019 and has since withdrawn allowances from circulation every year. 

The Commission publishes the TNAC each year. It is calculated for the preceding year, while 
supply adjustments are made over the 12 months following its publication and according to  
a specific key. On 1 June 2024, the Commission published the Communication on the TNAC 

15 

 
 
 
for 202336. It reflects changes made to strengthen the Reserve as part of Fit for 55 package – in 
the revision of both the ETS Directive and the MSR Decision.  

The 2023 TNAC totalled 1.11 billion allowances – a decrease compared to 2022, but still above 
the threshold activating the Reserve. As a result, 267 million allowances (24% of the TNAC) 
are being withdrawn from auctions between September 2024 and August 2025. As of 2023,  
the  MSR  invalidates  allowances  in  its  holdings  above  a  certain  threshold.  As  from  2024,  
the applicable threshold has been set at 400 million allowances. On 1 January 2024, the MSR 
invalidated 382 million allowances, leaving 400 million in the Reserve. Since 2023, the MSR 
has invalidated a total of 2.9 billion allowances.  

Figure 4 illustrates the trend in the surplus of allowances in the EU carbon market since 2013. 
National contributions to the MSR are presented in Table B in Section II of the accompanying 
staff working document. 

2,08

2,09

1,82

1,68

1,65

1,65

1,58

1,45

1,39

1,13

1,11

]
s
n
o
i
l
l
i
b
[

s
e
c
n
a
w
o
l
l

A

2,5

2,0

1,5

1,0

0,5

0,0

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Figure 4. Surplus of allowances in the EU ETS (2013-2023) 

6.2. Voluntary cancellation  

Article 12(4) of the ETS Directive relates to Member States cancelling allowances, in the event 
of  closure  of  electricity  generation  capacity  in  their  territory  due  to  additional  national 
measures.  In  such  a  case,  the  Member  State  concerned  must  inform  the  Commission  of  
an  intended  cancellation.  The  cancellation  is  carried  out  by  reducing  the  total  quantity  of 
allowances  to  be  auctioned  by  the  Member  State  concerned  and  the  quantity  is  limited  to  
a maximum of the sum of verified emissions of the installation(s) being closed, over a period 
of 5 years preceding the closure. The procedure for this cancellation of allowances is laid down 
in Article 25 of the Auctioning Regulation.  

36  Communication  from  the  Commission  -  Publication  of  the  total  number  of  allowances  in  circulation  in  2023  for  
the purposes of the Market Stability Reserve under the EU Emissions Trading System established by Directive 2003/87/EC, 
(OJ C, C/2024/3415, 3.6.2024) 

16 

 
 
 
 
 
In December 2023, Germany notified its intention to voluntarily cancel allowances associated 
with the closure of two power plants in 2022 as part of the country’s coal phase out policy.  
The notified number of allowances to be cancelled is yet to be determined. The Commission 
has published the notification on its website37. 

The  cancellations  are  planned  to  occur  between  2025  and  2030.  The  exact  number  of 
allowances  to  be  cancelled  in  relation  to  the  notification  may  be  communicated  to  
the  Commission  annually.  The  deadline  for  the  first  notification  is  31 May  2025.  
The  methodology  to  calculate  the  overall  number  of  allowances  to  be  cancelled  is  part  of  
the notification and takes into account the emissions of the replacing electricity generation in 
the electricity market as well as the operation of the Market Stability Reserve.  

6.3. Market oversight  

The EU carbon market is subject to robust market oversight rules enshrined in EU financial 
markets. It consists of a primary market, where emission allowances are auctioned to market 
participants  and  a  secondary  market  where  spot  and  derivative  contracts  of  emissions 
allowances  are  traded  among  market  participants.  Both  spot  and  derivatives  in  emissions 
allowances are classified as financial instruments under MIFID II – Directive on markets in 
financial  instruments  (Directive  2014/65/EU)38.  This  classification  is  also  reflected  in 
secondary legislation, including the Auctioning Regulation, which oversees the primary market 
(auctions of allowances). 

Supervision of the EU carbon market is shared between the financial authorities of all Member 
States39, under the coordination of the European regulator, the European Securities and Markets 
Authority  (ESMA).  ESMA  monitor  markets  participants’  behaviour  through  extensive 
reporting  and  transparency  requirements.  In  addition,  the  Regulation  on  market  abuse 
(Regulation 596/2014)40 obliges market participants to immediately report suspicious orders 
and transactions. National authorities in turn have the power to respond with remedial action 
or penalties if they identify market abuse.  

In the 2023 revision of the ETS Directive, several amendments were agreed to further improve 
the transparency of the EU carbon market. ESMA has been requested to conduct a periodic 
assessment of the functioning of the market. On 31 August 2023, ESMA published the ‘Report 
on  trends,  risks  and  vulnerabilities  of  2023’,  concluding  that  the  EU  carbon  market  had 
remained stable in 2023 and had continued to operate in line with market fundamentals.  

37 Notification by Germany of voluntary cancellation for plants closed in 2022, DG Climate Action, 2.05.2024 

38 Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments 
(OJ L 173, 12.6.2014). See consolidated version.  

39 See the list of national competent authorities responsible under the Regulation on market abuse on ESMA’s website. 

40 Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (OJ L 173, 
12.6.2014). See consolidated version.  

17 

 
 
 
On 7 October 2024, ESMA published an updated report on the monitoring of the EU carbon 
market41. The report includes the most recent analysis of the carbon market, based on 2023 
data. The report does not unveil any significant issue in the functioning of the market. It points 
to  the  decarbonisation  of  the  power  sector  and  to  industrial  activity  as  important  market 
fundamentals for the evolution of the market.  

ESMA  also  outlined  the  relative  concentration  of  auctions,  which  is  due  to  the  operators’ 
preference to source allowances via financial intermediaries. ESMA explained that trading in 
secondary markets  is  mainly undertaken through  derivatives,  following  the annual  EU ETS 
compliance  cycle,  where  non-financial  sector  firms  hold  long  positions  (for  compliance 
purposes), while banks and investment firms hold short positions. The report underlines that 
most  recommendations  from  ESMA’s  2022  report,  which  were  aimed  to  enhance  
the transparency of the carbon market, have been implemented.  

ESMA  also  stressed  the  importance  of  having  Legal  Entity  Identifiers  (LEIs)  available  for 
entities in the Union Registry and calls for additional effort by national administrators to ensure 
a timely implementation of the LEI registration requirement. This is particularly relevant in 
2024, as the number of  account  holders will increase due to  the expansion of the EU ETS. 
ESMA considers that further analysis and monitoring of the carbon market is warranted in this 
respect.  

While it is not mandatory to have an LEI to open an account in the Union Registry, entities that 
have  an  LEI  are  required  to  report  this  information  in  the  Union  Registry  when  opening  
an  account.  In  addition,  the  2023  amendment  of  the  Registry  Regulation  (Regulation 
2019/1122)42 requires that national administrators review, by the end of 2024, the accounts that 
do not contain information on the LEI or status of trading venue or central counterparty referred 
to in Table III-I of Annex III to the Regulation. 

On  28 March  2024,  the  revised  MIFID  II43,  MIFIR  –  Regulation  on  markets  in  financial 
instruments  (Regulation  2024/791)44  entered  into  force,  further  strengthening  the  rules  on 
financial  markets,  transparency  and  oversight.  Article 57  of  MIFIR  extends  position 
management  controls  to  trading  venues,  which  trade  derivatives  on  emission  allowances. 
Article 58 of MIFIR amends the scope of position reporting of trading venues and investment 
firms by excluding emission allowances and introduces a new obligation to  submit position 

41 ESMA Market Report on EU Carbon Markets - 2024 (ESMA50-43599798-10379, 7.10.2024) 

42  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).  See 
consolidated version. 

43  Directive  (EU)  2024/790  of  the  European  Parliament  and  of  the  Council  of  28 February  2024  amending  Directive 
2014/65/EU on markets in financial instruments (OJ L, 2024/790, 8.3.2024). See consolidated version.  

44 Regulation (EU) 2024/791 of the European Parliament and of the Council of 28 February 2024 amending Regulation (EU) 
No  600/2014  of  the  European  Parliament  and  of  the  Council  of  15 May  2014  on  markets  in  financial  instruments  (OJ  L, 
2024/791, 8.3.2024). See consolidated version.  

18 

 
 
 
reports  twice  weekly45,  enhancing  the  transparency  for  trading  in  emission  allowances  and 
derivatives thereof.  

The  new  rules  also  require  the  Commission  to  conduct,  by  31 July  2025,  a  comprehensive 
assessment  of  the  appropriateness  of  the  overall  rule  framework  for  markets  of  commodity 
derivatives,  which  includes  emission  allowances  and  associated  derivative  products.  This 
assessment  will  consider  whether  the  regimes  for  the  position  limits  and  the  position 
management  controls  help  prevent  market  abuse  and  foster  orderly  pricing  and  settlement 
conditions. The Commission will also assess the criteria for establishing when an activity is to 
be  considered  ancillary  to  the  main  business  at  group  level,  considering  the  liquidity  and  
the orderly functioning  of commodity derivatives markets including the trading of emission 
allowances and derivatives thereof. Furthermore, the Commission should assess to what extent 
transaction data in markets for commodity derivatives or for derivatives of emission allowances 
could  be  collected  in  a  single  collecting  entity  and  harmonised  across  MIFIR  and  
the  Regulation  on  over-the-counter  derivatives,  central  counterparties  and  trade  repositories 
(Regulation 648/2012)46 and determine, which transaction data would be relevant for the public 
and how that transaction data would be best disseminated.  

As a follow-up to the new rules, ESMA published on 24 May 2024 a consultation paper47 on 
commodity  derivatives,  covering  all  the  key  changes  to  the  technical  standards  linked  to  
the MiFID II review for commodity derivatives. It seeks stakeholders’ views on the proposed 
amendments. On the basis of the feedback to this public consultation, ESMA is expected to 
finalise a report by the end of 2024 and may propose level 2 amendments on that basis.  

7.  Emission trends 

In  2023,  overall  emissions  in  the  EU  ETS  amounted  to  1 149.1 million  tonnes (Mt)  CO2eq 
(down  from  1 361.9 Mt CO2eq  in  2022).  Emissions  from  power  and  industry  installations 
accounted for 1 095.9 Mt CO2eq, 16.5% less than in 2022. This is the highest reduction in these 
emissions to date. 

With this development, ETS emissions from installations are now around 47.6% below 2005 
levels  and  well  on  track  to  achieve  the  2030  target  of  -62%.  The  observed  trend  confirms  
the  effectiveness  and  efficiency  of  the  EU  ETS  as  one  of  the  main  policy  incentives  for  
the decarbonisation of the European economy. 

The biggest driver for the record decrease in EU ETS emissions has been the power sector, 
where  emissions  from  electricity  and  heat  production  have  decreased  by  24%  compared  to 
2022. This decrease is mainly due to a substantial increase in renewable electricity production 

45 The obligation to publish two reports concerns only trading venues offering both futures and options. Trading venues offering 
only futures will continue to publish only one report. 

46 Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central 
counterparties and trade repositories (OJ L 201, 27.7.2012). See consolidated version.  

47 Consultation Paper on the amendments to certain technical standards for commodity derivatives, ESMA, 24.05.2024 

19 

 
 
 
(primarily wind and solar) and gas replacing coal in power generation, facilitated by sustained 
average carbon prices in 2023 of over EUR 80/tCO2.  

In 2023, renewable energy was the leading source of electricity in the EU, accounting for 44.7% 
of  all  electricity  production48.  At  the  same  time,  electricity  generated  from  fossil  fuels 
decreased  by  19.7%  compared  with  to  2022,  contributing  32.5%  of  the  total  electricity 
production.   

With 56 GW of new solar energy capacity installed in 2023, the EU has set yet another record 
from the additional 40 GW installed in 2022. Onshore and offshore wind energy in the EU had 
a total  cumulative installed  capacity of 221 GW  (201 GW onshore;  19 GW offshore),  with 
16 GW  installed  in  2023.  Wind  surpassed  natural  gas  to  become  the  EU’s  second  largest 
electricity generation technology behind nuclear49.  

Though  to  a  lesser  extent,  the  emission  reduction  in  the  power  sector  was  also  driven  by  
the recovery of hydro due to more favourable climate conditions and nuclear power, and a 2% 
reduction in electricity generation overall50. Early indications show that in the first half of 2024, 
around 50% of electricity generation came from renewables, with wind and solar generating 
more electricity than fossil fuels combined51.  

In the energy-intensive industry sectors, a reduction of emissions of 7.5% compared to 2022 
was observed, due to a combination of a reduced output and efficiency gains. Output levels for 
installations  in  the  scope  of  EU  ETS  are  not  available  at  time  of  publication.  Industrial 
production statistics from Eurostat show that overall industrial production fell slightly in 2023 
but remains higher than in 2019 and 2021 (i.e. immediately before the COVID-19 pandemic 
and Russia’s invasion of Ukraine).   

Table 4 shows the trend in ETS emissions from power and industry installations since 2019. 
Aviation emissions are discussed in Chapter 9.  

48 Renewables take the lead in power generation in 2023, DG Eurostat, 27.6.2024 

49 COM(2024) 404 final – State of the Energy Union report (pursuant to Regulation (EU)2018/1999 on the Governance of the 
Energy Union and Climate Action), 11.9.2024. 

50 Refers to net electricity production in EU27 and Norway, as reported by Eurostat.  

51 E.Graham and N.Fulghum (2024), Wind and solar overtake EU fossil fuels in the first half of 2024, 30.7.2024, EMBER 

20 

 
 
 
Table 4. Verified emissions from installations in the EU ETS (2019-2023) [million tonnes CO2eq]. Data 
extracted from the EU Registry on 30 June 2024.  

Year 

Verified emissions- 
installations 

2019 

1 530 

2020 

1 356 

(1 253 UK excl.) 

2021 

2022 

2023 

1 337 

1 313 

1 096 

Change year-on-year 

-9.1% 

-11.4% 

-1.4% 

(6.6% UK excl.) 

-1.8% 

-16.5% 

Verified emissions- 
electricity and heat 
generation 

822 

696 

(653 UK excl.) 

708 

725 

552 

Change year-on-year 

-14.7% 

-15.3% 

1.6% 

(8.5% UK excl.) 

2.4% 

-23.9% 

Verified emissions- 
industrial production 

708 

660 

(601 UK excl.) 

629 

589 

544 

Change year-on-year 

-1.6% 

-6.9% 

-4.7% 

(4.7% UK excl.) 

-6.4% 

-7.5% 

Figure 5 and Figure 6 illustrate trends in emissions from fossil fuel combustion in installations 
covered  by  the  EU  ETS  –  as  a  share  of  installations’  total  emissions  and  by  fuel  type, 
respectively52. Not all emissions under the ETS originate from the combustion of fossil fuels, 
some  emissions  originate  directly  from  industrial  processes.  Figure  5  shows  the  share  of 
emissions  from  fossil  fuel  combustion  in  installations’  total  emissions.  Figure  6  shows  
the breakdown of combustion emissions by fuel type.  

Altogether, emissions are on a downward trend  driven by the decarbonisation of the power 
sector (see Chapter 7) – the deployment of renewables, coal being replaced by natural gas and 
an increasing use of biomass53. As shown in Figure 6, the trend of an increased use of hard coal 
observed  in  2022  (linked  to  the  increase  in  natural  gas  prices  due  to  Russia’s  invasion  of 
Ukraine) has mostly reversed in 2023. In the meantime, the EU also achieved an 18%-reduction 
in natural gas demand between August 2022 and May 202454.  

52 This  analysis  relies on  data  on the  implementation  of  the  EU  ETS  reported  by  countries  every year  under Article 21  of  
the ETS Directive (deadline of 30 June). By 25 October 2024, the day this report was finalised, Italy had still not submitted 
their report for 2023. In the absence of the latest data for Italy, this chapter uses the data reported by Italy for 2022 as a proxy 
to make year-to-year comparison possible. For all other countries, 2023 data is used.  

53 Zero-rated emissions from biomass account for 20.5% on top of the ETS installation emissions in 2023.  

54 2024 State of the Energy Union report - see footnote 49. 

21 

 
 
 
 
)

q
e
2

O
C

t

G

(

s
n
o
i
s
s
i
m
E

1,6

1,4

1,2

1

0,8

0,6

0,4

0,2

0

87%

85%

85%

85%

85%

84%

82%

82%

83%

83%

84%

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Figure 5. Trend in total emissions from fossil fuel combustion in installations covered by the EU ETS 
(2013-2023). Labels show the %-share of the installations’ total emissions.  

120%

100%

8,2% 8,9% 8,8% 9,1% 9,3% 10,9% 12,9% 13,7% 15,6% 15,8%
9,0% 6,0% 5,7% 6,3% 6,9% 7,2% 6,2% 6,8% 6,3% 6,0% 6,4%

20,5%

80%

3,6%
5,8%

4,0% 3,6% 3,8% 4,0% 4,1% 4,3% 3,9% 4,3% 4,0% 4,6%
6,4% 6,6% 6,5% 6,8% 7,2% 7,7% 8,4% 7,5% 8,3% 9,6%

60%

26,6% 30,9% 30,5% 28,6% 28,9% 28,7% 26,3% 23,3% 24,5% 24,3% 21,4%

40%

20%

0%

22,7% 21,4% 21,6% 24,0% 25,5% 25,6% 31,3% 34,8% 32,9% 30,1% 32,6%

24,7% 24,2% 24,9% 24,1% 21,3% 20,6% 17,0% 15,6% 17,3% 19,8% 17,5%

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Zero rated biomass

Other fossil fuels˟

LPG

Peat

Coke oven gas

Petroleum coke

Coke

Fuel oil

Blast furnace gas

Refinery gas

Lignite

Natural gas

Hard coal

Figure 6. Trend in the share of emissions from the combustion of different fuels in installations covered 
by  the  EU  ETS  (2013-2023).  Labels  show  the  %-share  of  installations’ total  combustion  emissions. 
Labels are not shown if emissions from the combustion of a particular fuel never exceed a 3%-share. 
Other fossil fuels* refer to fuels not already listed in the legend. Emissions from the combustion of 
biomass  are  zero-rated  under  the  EU  ETS,  hence  they  are  shown  on  top  of  installations’  total 
combustion emissions.  

8.  Revenues from the EU ETS  

The sale of allowances in the EU ETS auctions raises a substantial revenue for Member States 
to  support  climate  action  and  energy  transformation.  In  2023,  the  total  auction  revenue 
amounted to EUR 43.6 billion. Of this, EUR 33 billion went directly to the Member States and 

22 

 
 
 
 
 
 
EUR 0.3 billion went to Iceland, Liechtenstein, Norway and Northern Ireland. EUR 7.4 billion 
supplied  the  ETS  Innovation  Fund  and  the  ETS  Modernisation  Fund,  and  the  remaining 
EUR 2.8 billion  supplied  the  RRF,  which  Member  States  use  to  advance  the  clean  energy 
transition and boost energy security – by implementing the reforms and investments included 
to their resilience and recovery plans. Figure 7 shows the distribution of 2023 auction revenue. 
Detailed revenue data per country and per fund is included in Section III of the accompanying 
staff working document.  

Resilience and 
Recovery Facility

Modernisation Fund

Innovation Fund

Iceland. 
Liechtenstein, 
Norway and 
Northern Ireland

Member States

Figure 7. Distribution of 2023 ETS auction revenue between the national budgets, the Innovation and 
Modernisation Funds and the Resilience and Recovery Facility 

With  the  2023  revision  of  the  ETS  Directive,  the  rules  on  the  use  of  auction  revenue  have 
changed. Under Article 10(3) of the ETS Directive, since June 2023 Member States are obliged 
to use 100% of the revenue collected (or an equivalent financial value) to support climate action 
and  energy  transformation,  except  for  any  revenue  that  Member  States  spend  in  aid  for 
electricity-intensive  industries  for  indirect  carbon  costs  (see  Chapter  8.1).  The  specific 
purposes  are  listed  in  Article 10(3)  and  include  industrial  decarbonisation,  energy 
transformation, clean tech technologies, adaptation to climate change, decarbonisation of the 
transport  sector  and  actions  for  just  transition.  The  Commission  will  closely  monitor 
compliance with this new obligation to ensure all ETS revenue is truly spent on these purposes. 

The  obligation  covers  the  revenue  from  the  auctioning  of  additional  allowances  due  to  
the inclusion of maritime transport in the EU ETS, where Member States are encouraged to 
increase  their  contribution  to  the  protection,  restoration  and  better  management  of  marine-
based ecosystems, marine protected areas in particular. Also, Member States that receive higher 
volumes of additional allowances due to their high ratio of shipping companies compared to 
the population, should use the corresponding share for maritime-related purposes.  

23 

 
 
 
Member  States  report  to  the  Commission  every  year  under  the  Governance  Regulation 
(Regulation  2018/1999)55  on  how  they  use  their  ETS  revenue.  These  reports  are  based  on 
templates and are publicly available56. The templates were updated in May 2024 to reflect the 
new  obligation  and  collect  more  information  on  the  revenue  use57.  Reporting  must  be 
sufficiently detailed to assess compliance with the spending target. Otherwise, the Commission 
may task a Member State to resubmit the information and fill any gaps.  

While all relevant ETS revenue must go to climate- and energy-related investments, this budget 
does not need to be spent in full in the same year that the revenue is generated. Of the 2023 
revenue to be used for Article 10(3) purposes, 72% was already disbursed in 2023 and another 
3% was committed to specific actions. Future reports will describe how Member States have 
used the remainder.   

Of the EUR 33 billion in ETS revenue that Member States collected in 2023, EUR 30.9 billion 
is subject to the obligation under the Article 10(3)58. EUR 2.1 billion of the 2023 revenue was 
reported  to  finance  for  electricity-intensive  industries  for  indirect  carbon  costs.  From  the 
EUR 30.9 billion,  Member  States  reported59  having  already  disbursed  EUR 22.2 billion  and 
committed  a  further  EUR 0.8 billion  to  Article  10(3)  purposes.  This  leaves  some 
EUR 7.9 billion still to be allocated, disbursed and reported.  

Table 5 includes a split of the EUR 33 billion in ETS revenue collected by Member States in 
2023. Member States also reported EUR 1.0 billion of revenues generated in earlier years as 
allocated  (EUR 0.6 billion  disbursed  and  EUR 0.4 committed)  in  2023  on  Article  10(3) 
purposes. 

55 Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11 December 2018 on the Governance of the 
Energy Union and Climate Action (OJ L 328, 21.12.2018) 

56 Use of ETS auctioning revenues - Reporting year 2024 – GovReg, Reportnet3, European Environment Agency 

57 Adopted: New templates for Member States’ climate reporting, DG Climate Action, 7.5.2024 

58 Member States were encouraged to use at least 50% of the revenue collected up to 4 June 2023 to support decarbonisation 
and energy transformation investments. For the revenue collected from 5 June 2023 onwards, the obligation to use 100% (or 
equivalent financial value) to support decarbonisation and energy transformation in ETS sectors applies.  

59  Some  countries  that  co-fund  actions  with  their  ETS  revenue  report  the  full  value  of  the  co-funded  action;  therefore,  
the sum of their actions is higher than their revenue. The values in this chapter were adjusted for this, e.g., if the sum of actions 
was twice the generated revenue, it was assumed that half of each action and indirect carbon cost compensation was paid from 
the auction revenue. 

24 

 
 
 
Table 5. Split of the EUR 33 billion in ETS revenue collected by Member States in 2023 

Revenue reported as used to finance aid for carbon costs 

Revenue subject to the Article 10(3) obligation and disbursed in 2023 

Revenue collected by Member States in 2023, subject to the Article 10(3) obligation 
and committed 

Revenue collected by Member States in 2023, still to be allocated, disbursed  
and reported 

Revenue  
(EUR billion) 

2.1 

22.2 

0.8 

7.9 

As illustrated in Figure 8 of the EUR 22.2 billion in revenue reported as disbursed in 2023 on 
Article 10(3) purposes, EUR 9.7 billion was used for projects in the ‘Energy supply, grids and 
storage’ category, EUR 2.3 billion for ‘Energy efficiency, heating and cooling in buildings’ 
and EUR 5.1 billion for ‘Public transport and mobility’. Of the 323 actions reported in these 
three categories, examples include the installation of photovoltaics system in Romania, grants 
for energy efficiency improvements for low-income households in France and the expansion 
of the metro networks in Lisbon and Porto in Portugal.  

In  addition,  Member  States  reported  having  allocated  EUR 0.7 billion  to  projects  in  
the category ‘Industry decarbonisation (low-carbon technologies, CCUS and energy efficiency 
in industrial sector excl. energy sector)’, including financial and technical support to businesses 
in  the  Walloon  region  of  Belgium  in  their  transition  towards  a  net-zero  economy.  Member 
States also reported having allocated EUR 2.7 billion to ‘Social support and just transition’, 
including the Greek Energy Transition Fund (covering among other energy subsidies for low-
income households, business support in transitioning areas, reskilling programmes and green 
infrastructure projects).  

For  EUR 1.4 billion  in  2023  disbursements,  Member  States  reported  the  ‘Other’  category, 
which includes actions that do not fit any other categories or fit multiple categories. Examples 
include  the  Swedish  Climate  Leap  fund  that  supports  various  emission  reduction,  biogas, 
biodiversity and research projects.  

25 

 
 
 
 
Other
6%

Industry 
decarbonisation 
3%

Public transport and 
mobility 
23%

Social support and just 
transition
12%

Energy efficiency, 
heating and cooling in 
buildings
10%

Combined categories 
under EUR 500 
million
3%

Energy supply, grids 
and storage 
43%

Figure 8. Split of the EUR 22.2 billion of the 2023 ETS auction revenue reported as disbursed, per 
category. Combined categories under EUR 500 million include (in EUR million) road transport (309), 
adaptation  (155),  international  purposes  and  international  climate  finance  (110),  LULUCF, 
agriculture  and  land-based  removals  (59),  administrative  expenses  (54),  waste  management  (29), 
maritime transport (17), aviation (13) and permanent removals (3). 

The  EU  ETS  auction  revenue  has  been  an  essential  contribution  to  these  and  many  other 
impactful  projects  in  the  Member  States.  These  projects  have  not  only  helped  to  reduce 
emissions, but  also  ensure that the green transition  is  just. Case-studies of  13 projects  (co-) 
financed  from  auctioning  revenues  demonstrate  the  positive  effects  of  the  revenues  on  
the  climate  transition  in  the  EU60.  Importantly,  Member  States  must  make  effort  to  ensure  
the  visibility  of  the  source  of  the  funding  for  the  actions  or  projects  funded  from  the  ETS 
revenue  to  show  the  EU  ETS’  contribution  to  progressive  decarbonisation  and  the  just 
transition. This has been lacking for most of the actions reported for 2023 and the Commission 
is looking to follow-up.  

An overview of how each Member State used their ETS revenue is included in the staff working 
document accompanying the 2024 Climate action progress report61.  

8.1. Aid for indirect costs  

Member States can grant state aid to certain electricity-intensive industries under the EU ETS 
for  the  carbon  costs  arising  from  indirect  emissions,  specifically  from  increased  electricity 
prices  due  to  energy  companies  passing  on  the  cost  of  buying  allowances  to  business 
to  harmonise 
consumers.  The  Commission  adopted  EU  ETS  state  aid  guidelines 

60 Climate and Energy in the EU, Use of ETS auctioning revenues, Good practices, European Environment Agency 
11.10.2024 

61 COM(2024) 498 - 2024 Climate action progress report and the accompanying staff working document (to be published) 

26 

 
 
 
 
implementation of this aid between Member States and minimise competition distortions in  
the single market62.  

In  2023,  15  Member  States  paid  for  indirect  costs  incurred  in  2022,  having  notified  their 
schemes to the Commission for state aid assessment and having received acknowledgement of 
their  compatibility  with  the  single  market.  Austria,  Greece  and  Slovenia  introduced  new 
schemes, while the Netherlands  paused their scheme63. Under the schemes implemented by 
Member States, beneficiaries should re-invest part of the aid in projects that lower their direct 
or indirect carbon footprint and with this, their exposure to carbon leakage risk.  

Within 3 months after the end of each year, Member States with an indirect cost compensation 
scheme in place must publish the total compensation amount paid, including a breakdown per 
recipient sector and subsector. Table 6 summarises the data published by Member States on 
the aid paid in 2023 for indirect costs incurred in 2022. These amounts are also compared with 
2022 auction revenues.  

The  total  indirect  cost  payments  by  these  15  Member  States  in  2023  amounted  to  around 
EUR 3.95 billion.  This  is  more  than  the  EUR 2.16  billion  disbursed  in  2022,  which  is  an 
approximate 80%-increase of indirect cost payments. The number of installations that received 
aid increased slightly (by 56) as more Member States were implementing schemes for indirect 
costs.   

Aid for indirect carbon costs in a given year is based on the forward price of allowances in  
the previous year. Therefore, the aid disbursed in 2023 for the costs incurred in 2022 is based 
on the average forward price in 2021. This price was EUR 54.1, which is more than double  
the EUR 25.09 used for indirect costs incurred in 2021. This forward price has since increased, 
to over EUR 80 in 2022 and 2023, meaning that aid for indirect costs incurred in 2023 and 
2024 will be based on a higher carbon price. Indirect cost compensation schemes typically have 
a maximum budget calculated for the whole application period (which for most Member States 
covers 2021-2030).   

The indirect  cost  payments  also  increased in  relative terms.  The total  payments for indirect 
costs incurred in 2022 were equivalent to 16% of the 2022 auction revenue collected by the  
15 Member States, compared to payments reaching 10% of the revenue collected in 2021 by 
13  Member  States  awarding  aid  for  that  same  year.  To  a  large  extent,  this  was  driven  by  
the decrease in the absolute volume of auctioned allowances in 2022 as well as the increase in 
the forward price mentioned above.   

62 Guidelines on certain state aid measures in the context of the system for greenhouse gas emission allowances trading 
scheme post-2021 (OJ C 317, 25.9.2020) 

63 In addition, Portugal adopted an indirect cost scheme at the end of 2022. 

27 

 
 
 
 
Table 6. Aid amounts paid out in 2023 from the ETS auction revenue for indirect costs incurred in 2022 

Member State 

Amount paid   
for indirect costs   
incurred in 2022   
[million EUR] 

Number   
of recipients  
(installations) 

Auction   
revenues   
in 202264   
[million EUR] 

Relative size of 
indirect costs aid 
compared to 
auction revenue 

Austria  

Belgium 

Czechia  

Finland  

France  

Germany  

Greece65 

Italy  

Luxembourg  

Poland  

Portugal66 

Romania  

Slovakia  

Slovenia  

Spain  

184.8  

186.2  

50.3  

117.7  

604.2  

1 643.7  

171.5  

150.6  

25.0  

372.7  

25.0  

145.0  

20.9  

26.0  

76  

59 

21  

49  

280  

668  

53  

251  

4  

95  

22  

30  

9  

17  

375.4  

649.2  

670.6  

504.7  

1834.7  

6 772.4  

1 314.0  

3 166.1  

49.2%  

28.7%  

7.5%  

23.3%  

32.9%  

24.3%  

13.1%  

4.8%  

4.8  

517.0%  

4 966.4  

661.6  

482.4  

342.4  

170.5  

7.5%  

3.8%  

30.1%  

6.1%  

15.3%  

7.2%  

228.8 

185  

3 186.8  

Member States that spend more than 25% of their auction revenue on indirect costs in any year 
are required to publish a report explaining why they exceeded this threshold. In 2023, most 
Member States stayed well below this threshold. Nevertheless, five Member States spent more 
than  25%  of  their  auction  revenue  on  indirect  cost  payments:  Austria,  Belgium,  France, 
Luxembourg and Romania. Justifications provided by these Member States are summarised 
below.  

Austria reported that a temporary scheme was adopted in 2022 with compensation permitted 
to exceed 25% because of high electricity prices and Russia’s invasion of Ukraine. In Belgium 

64 Excluding revenues from the auctioning of aviation allowances. 

65 In the case of Greece, payments of EUR 86.1 million were made in 2023 for indirect costs incurred in 2021, in addition to 
the aid shown in the table. 

66 In the case of Portugal, EUR 24.6 million of aid was disbursed to 26 installations in 2022 for indirect costs incurred in 
2022, in addition to the aid shown in the table. 

28 

 
 
 
and France, the high proportion of auction revenue paid was attributed to the country’s high 
share of low-carbon electricity generation, leading to relatively low auction revenues compared 
to  its  share  of  electro-intensive  industries.  Romania  reported  that  the  25%  threshold  was 
exceeded partly due to the increase in the carbon price used to calculate payments.  

Luxembourg’s expenditure far outweighed its total auction revenue. Although the country’s 
payments  increased  in  2023,  the  increase  in  revenue  share  was  also  attributed  to  a  drop  in  
the country’s auction volume caused by its use of ETS allowances for offsetting emissions in 
the  sectors  covered  by  the  Effort  Sharing  Regulation.  This  practice  is  referred  to  as  ‘Effort 
Sharing Regulation flexibility’67. Overall, Luxembourg received 35% less revenue in 2022 than 
in 2021. Both Luxembourg and Romania also mentioned that the transfer of allowances into 
the MSR contributed to a reduction in the volume of auctioned allowances. 

8.2. ETS Innovation Fund  

The Innovation Fund is one of the world’s largest funding programmes for rolling out low- and 
zero-carbon innovative solutions and technologies in energy, industry and net-zero mobility, 
funded  entirely  by  the  EU  ETS.  The  Fund  provides  grants  for  projects  aimed  at 
commercialising  innovative  low-carbon  technologies  and  bringing  industrial  solutions  to 
market  to  decarbonise  Europe  and  support  the  transition  to  climate  neutrality.  With  
an estimated budget of EUR 40 billion available (based on a carbon price of EUR 75/tCO2), 
the  Innovation  Fund  has  launched  eight  calls  for  proposals  since  2020,  including  one  for 
auctions under the European Hydrogen Bank.  

The Commission reports in more detail on implementation of the Innovation Fund separately. 
The  second  progress  report  on  implementation  of  the  Innovation  Fund  is  expected  in  Q4-
202468. 

Following  the  2022  round  of  calls,  39  large-scale  and  15  small-scale  projects  signed  grant 
agreements.  Over  EUR 3.5 billion  will  fund  innovation,  including  in  energy-intensive 
industries,  hydrogen  production,  renewable  energy  generation  and  the  manufacturing  of 
components  for  energy  storage  and  renewables,  and  help  advance  decarbonisation  in  

67 The Effort Sharing Regulation creates a one-off flexibility whereby Member States can have up to a maximum of 100 million 
ETS  allowances  collectively  cancelled  in  2021-2030,  so  they  can  comply  with  their  respective  greenhouse  gas  emission 
reduction  targets under  this  Regulation. The  flexibility  is  for  Member  States  with  targets  significantly  above  both the  EU 
average and their potential to make cost-effective reductions, as well as Member States that did not allocate any free EU ETS 
allowances to industrial installations in 2013 (nine countries in total: Austria, Belgium, Denmark, Finland, Ireland, Luxemburg, 
Malta, Netherlands and Sweden. A cancellation is made from the auctioning volume of the Member State concerned under 
Article 10 of the ETS Directive. The eligible Member States notified the use of 21 641 364 allowances under the Effort Sharing 
Regulation flexibility in 2021-2023.  

68 Report from the Commission to the European Parliament and the Council on the implementation of the Innovation Fund 
(COM/2022/416 final) 

29 

 
 
 
17 countries69. About EUR 55 million will fund small-scale innovation in several hard-to-abate 
sectors, including biofuels, glass and ceramics, cement, energy storage and renewables70. 

With  projects  awarded  support  in  Denmark,  Greece,  Hungary  and  Latvia,  the  sectoral  and 
geographical  balance of  the  Innovation Fund  has further  improved. By June  2024, the total 
Innovation Fund portfolio counted 127 projects either under implementation or in the process 
of  having  a  grant  agreement  prepared,  with  an  EU  ETS  contribution  of  EUR 7.35 billion71. 
When  completed,  it  is  estimated  that  these  projects  will  save  around  457 Mt CO2eq  in 
emissions in their first 10 years of operation. 

The  incentive  provided  by  the  EU  ETS  carbon  price  is  much  larger  for  these  projects  than  
the amount of the EU ETS-sourced funding. For example, the avoided carbon cost benefit to 
companies’ business cases from the projects supported by the Innovation Fund so far is around 
EUR 34 billion (carbon costs avoided due to  lower emissions at  an average carbon price of 
EUR 75/tCO2). This reflects the EU ETS logic whereby the carbon price is the main long-term 
incentive, while the Innovation Fund supplements this incentive to accelerate change72. 

In parallel, 27 unsuccessful projects from the third round of calls (both large- and small-scale) 
were  selected  for  project  development  assistance  under  the  Innovation  Fund.  Since  
the  beginning  of  the  programme,  70  projects  have  been  awarded  project  development 
assistance, creating a strong pipeline of future good quality applications. This support amounts 
to EUR 24 million and is provided by the European Investment Bank (EIB). 

The 2023 Innovation Fund Call for net-zero technologies (IF23 NZT Call) closed on 9 April 
2024,  having  received  337  applications.  It  included  dedicated  topics  for  cleantech 
manufacturing and pilot projects, in addition to three general decarbonisation topics, organised 
into  small-,  medium-,  and  large-scale  projects.  The  IF23  NZT  Call  already  reflected  
the extended application of emissions trading to buildings, road transport and particularly to 
the  maritime  sector  with  specific  provisions  to  accelerate  its  decarbonisation,  including  in 
relation to the production and uptake of renewable and low-carbon fuels.  

The results of the IF23 NZT Call are expected in Q4-2024, with grant agreements expected to 
be  signed  at  the  beginning  of  2025.  Approximately  EUR 4 billion  will  be  provided  to  fund 
innovative  low-carbon  and  net-zero  technologies.  For  the  first  time,  projects  that  meet  
the minimum thresholds for all award criteria will receive the STEP (Strategic Technologies 
for  Europe  Platform)  Seal,  introduced  by  the  STEP  Regulation  (Regulation  2024/795)73.  

69 The projects will contribute to the decarbonisation of 16 Member States (Austria, Belgium, Croatia, Czechia, Denmark, 
France, Germany, Greece, Hungary, Ireland, Italy, Latvia, the Netherlands, Portugal, Spain and Sweden), plus Norway. 

70 16 grants from the EU’s Innovation Fund awarded to projects across Europe, DG Climate Action, 6.6.2023 

71 Updated portfolio of projects signed under the Innovation Fund 

72 Recital 20 of Directive 2009/29/EC, reaffirmed in recital 14 of Directive (EU) 2018/410 

73 Regulation (EU) 2024/795 of the European Parliament and of the Council of 29 February 2024 establishing the Strategic 
Technologies for Europe Platform (STEP), (OJ L, 2024/795, 29.2.2024)  

30 

 
 
 
The Seal is the EU quality label awarded to high-quality projects that contribute to the STEP 
objectives. For the projects in question, it will facilitate access to funding from Member States.  

The  2023  revision  of  the  ETS  Directive  introduced  competitive  bidding  (‘auctions’)  under  
the Innovation Fund, and the first pilot auction for the production of renewable fuel of non-
biological origin hydrogen (RFNBO H2) ran from 23 November 2023 to 8 February 2024 (IF23 
Auction). The  IF23 Auction attracted 132 bids  from  17 countries across Europe, asking for  
15 times the available budget, indicating significant oversubscription. The evaluation results 
were published at the end of April 2024.  

Seven bids were selected in the IF23 Auction for grant agreement preparation, for a total of 
EUR 720 million  in  EU  contributions74.  The  selected  projects  submitted  bids  of  between 
EUR 0.37 and EUR 0.48 per kilogram of RFNBO H2 produced. Based on the pay-as-bid design 
of  the  pilot  auction,  these  projects  will  receive  Innovation  Fund  grants  ranging  from 
EUR 8 million to EUR 245 million. The grant agreements are expected to be signed in October 
2024.  

With this first pilot auction, the Innovation Fund also tested the ‘Auction-as-a-Service’ feature, 
allowing EEA countries to use the IF auction to allocate additional national funds to national 
projects  that  did  not  fit  within  the  Innovation  Fund  auction  budget.  Germany  contributed 
EUR 350 million  to  a  national  funding  window  in  the  pilot  auction.  Similarly,  DG  Climate 
Action is working closely with DG Competition to set up a similar feature for regular calls for 
proposals,  called  'Grants-as-a-Service.'  Both  features  enable  EEA  countries  to  leverage  
the well-established IF evaluation procedures and avoid unnecessary administrative burdens in 
developing and running new support schemes for the same technologies.  

8.3. ETS Modernisation Fund 

The  Modernisation  Fund  is  a  solidarity  programme  financed  by  the  EU  ETS.  It  supports  
10  lower-income  Member  States75  and  from  2024,  13  lower-income  Member  States76  in 
meeting the 2030 climate and energy targets by helping them roll out projects that modernise 
energy  systems  and  improve  energy  efficiency.  The  Fund’s  budget  comes  from  auctioning  
a  share  of  the  EU  ETS  cap  (corresponding  to  438 million  allowances),  allocated  among  
the beneficiary Member States according to a fixed key77. In addition, six beneficiary Member 
States have transferred 320 million allowances from phase 3 of the EU ETS (2013-2020) to  
the  Modernisation  Fund.  This  brings  its  total  size  to  over  750 million  allowances,  or 
EUR 56 billion from 2021 to 2030 assuming an average carbon price of EUR 75/tCO2.  

74 Three projects from Spain, two from Portugal and a project in in Finland and in Norway.  

75 The first beneficiary Member States were Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania 
and Slovakia.  

76 Greece, Portugal and Slovenia were added to the original 10 Member States in the 2023 revision of the ETS Directive. 

77 Annex IIb to the ETS Directive – Modernisation Fund allocation key  

31 

 
 
 
Although Member States select the investments they wish to support, they are required to use 
most of their resources under the Fund for priority investments. These include the generation 
and  use  of  renewable  electricity,  heating  and  cooling,  energy  efficiency,  storage  and  
the modernisation of energy networks, support for low-income households to address energy 
poverty  and  actions  for  just  transition  in  fossil-dependent  regions.  The  EIB  reviews  
the  investment  proposals.  The  Commission  takes  a  disbursement  decision  once  the  EIB 
confirms  an  investment  as  priority  or  recommends  for  financing  by  the  Fund’s  Investment 
Committee  as  a  non-priority.  Disbursement  decisions  are  issued  in  two  cycles,  every  year, 
covering investments in all beneficiary Member States. 

Since  January  2021,  176  schemes  and  individual  projects  have  been  confirmed  for  a  total 
amount of EUR 12.7 billion, which has been disbursed to beneficiary Member States. These 
initiatives  mostly  relate  to  renewable  electricity,  energy  efficiency,  energy  storage  and  
the  modernisation  of  energy  networks.  Table  7  presents  the  amounts  disbursed  for  each 
Member State.  

In  June  2024,  the  Commission  adopted  the  seventh  disbursement  decision78  under  
the Modernisation Fund, second largest since 2021. On this basis, the EIB made payments for 
a  total  of  EUR 2.9 billion  to  10  beneficiary  Member  States79  to  finance  39  investment 
proposals. Projects include support to households for the acquisition and installation of new 
photovoltaic  systems  in  Czechia  and  contract-for-difference  support  schemes  to  produce 
electricity from renewable sources in Romania.  

Submissions for another round of proposals under the Modernisation Fund closed on 13 August 
2024 for non-priority projects and on 10 September 2024 for priority projects.  

The revision of the ETS Directive has brought significant changes to the Modernisation Fund’s 
size and governance. The size of the Fund has been increased by 110 million allowances. This 
top-up is  shared between 13 beneficiary Member States  – the 10 original  beneficiaries plus 
Greece, Portugal and Slovenia. A higher share of resources under the Fund has been allocated 
to the list of priority investments, which has been extended to include renewable heating and 
just transition  in  carbon-dependent  regions.  Investments  involving  gas have been subject  to  
a number of restrictions. As of 2025, investments must also comply with the ‘do no significant 
harm’ 
revision,  
the  Taxonomy  Regulation. 
the Modernisation Fund  Regulation  (Regulation  2020/1001)80 has  been amended.  It entered 
into force on 1 January 2024. 

requirements  under 

In  view  of 

the 

78 C(2024) 4190 final - Commission Decision of 12.06.2024 on the disbursement of revenues from the Modernisation Fund 
under Directive 2003/87/EC - First biannual disbursement cycle of 2024 

79 The fifth disbursement decision under the Modernisation Fund authorised payments to Romania (EUR 1.1 billion), 
Czechia (EUR 835 million), Poland (EUR 698 million), Hungary (EUR 77 million), Bulgaria (EUR 65 million), Lithuania 
(EUR 59 million), Croatia (EUR 52 million), Slovakia (EUR 35 million), Latvia (EUR 27 million) and Estonia 
(EUR 24 million). 

80 Commission Implementing Regulation (EU) 2020/1001 of 9 July 2020 laying down detailed rules for the application of 
Directive 2003/87/EC 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) 

32 

 
 
 
Table 7. Total disbursements from the Modernisation Fund (from 1 January 2021 to 30 June 2024) 

Beneficiary Member 
State 

Disbursed amounts 
(million EUR) 

Bulgaria 

Czechia 

Estonia 

Croatia 

Hungary 

Lithuania 

Latvia 

Poland 

Romania 

Slovakia 

Total 

262 

4 343 

178 

262 

185 

183 

32 

1 908 

4 679 

615 

12 647 

8.4. ETS Decarbonisation Fund for Greece 

Article 10a(9) of the ETS Directive grants Greece the right, under certain conditions, to claim 
up to 25 million allowances for the decarbonisation of the electricity supply of its islands81. 
Greece, the European Commission and the EIB are working to operationalise this provision. 
The EIB will be responsible for assessing the financial viability and socio-economic benefits 
of the Greek project proposal to decarbonise the electricity supply of its islands. If all conditions 
are fulfilled, including the EIB’s confirmation of Greece’s project proposal submitted under 
Article 10a(9), the allowances would be auctioned and the revenues made available for the co-
financing of up to 60% of approved project components. In concrete terms, the funding should 
support  renewable  energy  supply  projects  on  the  islands  and  help  connect  islands  with  
the mainland’s electricity grid. 

9.  Aviation 

The EU ETS has regulated emissions from the aviation sector since 2012. Legally, the system 
covers all outgoing flights from and all incoming flights to the EEA. In 2013, however, the EU 
limited  ETS  obligations  for  the  aviation  sector  to  flights  within  the  EEA,  to  support  

81 25 million allowances have been set aside for possible use under Article 10a(9) of the ETS Directive (Communication 
from the Commission Publication of the total number of allowances in circulation in 2021 for the purposes of the Market 
Stability Reserve under the EU Emissions Trading System established by Directive 2003/87/EC and of the number of 
unallocated allowances during the period 2013-2020 2022/C 195/02, C/2022/2780 (OJ C 195, 13.5.2022). 

33 

 
 
 
the  development  of  a  global  market-based  measure  to  reduce  aviation  emissions  by  
the International Civil Aviation Organization (ICAO)82. The limitation of the ETS Directive 
coverage  has  since  been  extended  three  times  and  the  2023  revision  of  the  ETS  Directive 
emphasises that it should be the last time-bound derogation to the EU ETS83.  

Between 2013 and 2023, the EU ETS achieved a total reduction in aviation net CO2 emissions 
of 206 Mt  through funding of emissions  reductions in  other  sectors.  In  2012-2020, aviation 
operators used nearly 19 million international credits for compliance in the EU ETS.  

Since  1 January  2020,  the  EU  ETS  covers  emissions  from  outgoing  flights  to  Switzerland, 
while  the  Swiss  ETS  applies  to  flights  departing  to  EEA  airports.  This  ensures  
a decarbonisation incentive while levelling the playing field in both directions. As of 1 January 
2021, the EU ETS applies to outgoing flights to the UK, while the UK ETS applies to flights 
departing to EEA airports. This maintains the carbon pricing coverage of aviation emissions 
despite the UK’s departure from the EU. 

Since 1 January 2024, the EU ETS covers emissions from most flights84 to and from the EU’s 
nine outermost regions as well as emissions from departing flights from the outermost regions 
to Switzerland and to the UK. Altogether, this amounts to an extension of ETS carbon pricing 
coverage  of  around  7%.  Switzerland  has  also  included  emissions  from  flights  departing  to  
the outermost regions in its ETS since 202485. 

In parallel, to facilitate progress at ICAO, the limited, intra-European scope of the EU ETS for 
aviation was extended until the end of 2026 as  all major third countries should be applying  
the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) from 2027. 
129 states participate in the voluntary phase of CORSIA that runs from 2024 to 2026. 

In 2023, around 26 million aviation allowances were issued in line with the applicable scope 
of  the  EU  ETS.  Free  allocation  amounted  to  22.5 million  allowances.  Aircraft  operators 
administered by national administrators in the EEA received a little less than 0.5 million Swiss 
aviation  allowances  for  free  under  the  Swiss  ETS.  Approximately  5.7 million  aviation 
allowances were auctioned in 2023.  

Emissions from aircraft operators continued to increase in 2023 compared to 2022. In 2023, 
emissions  amounted  to  54.1 Mt  CO2eq  (including  0.9 Mt  of  operators  administered  by 
Switzerland), up from 49.5 Mt in 2022. EU ETS aviation emissions are close to 2019 levels 
(adjusted  for  the  UK’s  departure  from  the  EU),  confirming  the  return  to  pre-COVID-19 

82 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 (OJ L 
113, 25.4.2013) 

83 Recital 30 of Directive 958/2024/EU revising the ETS Directive 

84 A temporary derogation from the EU ETS is provided until 2030 for emissions from flights between an aerodrome in  
an outermost region in one Member State and an aerodrome in the same Member State. 

85 Additional free allocation for flights to outermost regions, Emissions trading system for aircraft operators, Federal Office 
for Environment, 31.8.2024 

34 

 
 
 
pandemic emission levels86. Table 8 sets out verified emissions from aircraft operators, along 
with the volumes of allowances allocated for free and auctioned in the aviation sector since 
2019. Since 2021, the EU ETS no longer covers incoming flights from the UK.  

As  part  of  the  ‘Fit  for  55’  package,  two  reforms  concerning  the  EU  ETS  for  aviation  were 
adopted in 2023 – to advance emission reductions in the sector87 and to implement CORSIA 
for  extra-European  flights  of  EU-based  airlines  in  EU  law88.  Their  implementation  is 
underway.  

To implement CORSIA in EU law, the Commission adopted in February 2024 the list of states 
considered to be applying CORSIA for emissions in 202389. This list is updated annually. In 
July 2024, the Commission published the rules for calculating offsetting requirements under 
CORSIA90. The competent authorities in the Member States will use these rules for emissions 
until the end of 2026.  

In  a  significant  step  to  improve  transparency,  the  Commission  published  in  March  2024 
aggregated annual emissions data from aviation activities in 202291. This publication followed 
a  Commission  statement92  issued  during  the  legislative  process  for  the  2023  revision  of  
the ETS Directive. The Commission has committed to publishing more data on international 
aviation emissions, while protecting commercially sensitive data.  

86 European Aviation Overview 24-30 May, Eurocontrol, 1.6.2023 

87 Directive (EU) 2023/958 of the European Parliament and of the Council of 10 May 2023 amending Directive 2003/87/EC 
as regards aviation’s contribution to the Union’s economy-wide emission reduction target and the appropriate implementation 
of a global market-based measure (OJ L 130, 16.5.2023) 

88 Decision (EU) 2023/136 of the European Parliament and of the Council of 18 January 2023 amending Directive 2003/87/EC 
as regards the notification of offsetting in respect of a global market-based measure for aircraft operators based in the Union 
(OJ L 19, 20.1.2023) 

89 Commission Implementing Regulation (EU) 2024/622 of 22 February 2024 on the list of States which are considered to be 
applying CORSIA for the purposes of Directive 2003/87/EC of the European Parliament and of the Council for emissions in 
2023 (OJ L, 2024/622, 23.2.2024) 

90 Commission Implementing Regulation (EU) 2024/1879 of 9 July 2024 laying down rules for the application of Directive 
2003/87/EC  of  the  European  Parliament  and  of  the  Council  as  regards  the  calculation  of  offsetting  requirements  for  
the purpose of CORSIA (OJ L, 2024/1879, 10.7.2024) 

91 Publication of 2022 emissions data from aviation, DG Climate Action, 8.3.2024 

92 Commission statement, 20.4.2023 

35 

 
 
 
 
Table  8.  Aviation  in  the  EU  ETS  (2019-2023)  –  verified  emissions  [million  tonnes  CO2eq],  free 
allocation and allowances auctioned [million allowances]  

Year 

2019 

2020 

202159 

2022 

2023 

Verified emissions- 
aviation 

68.2 

25.2 

27.9 

49.5 

54.1 

Change year-on- year93 

+1% 

−63% 

+30% 

+77% 

+9.5% 

Free allocation (EU27 + 
Iceland, Liechtenstein,  
and Norway  
+ UK + Switzerland)94 

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

Volumes of allowances 
auctioned  

31.395 

32.5 

24.0 

23.1 

22.5 

1.0 

0.8 

0.3 

0.25 

0.23 

5.5 

9.2 

3.8 

3.7 

5.7 

The  2023  revision  of  the  ETS  Directive  advances  the  implementation  of  the  polluter  pays 
principle in the aviation sector. Free allowances for aircraft operators will be gradually phased 
out by the end of 2025. In 2024, 25% fewer free allowances are allocated to aircraft operators.  

At the same time, 20 million allowances (with an estimated current market value of around 
EUR 1.5 billion at a carbon price of EUR 75/tCO2) are earmarked to further support the uptake 
of  eligible  alternative  fuels.  This  support  increases  the  financial  incentive  provided  by  
the EU ETS to alternative fuels over fossil fuels, where zero-rating gives a financial incentive 
above EUR 200 per tonne of fuel. This incentive has been available for eligible fuels uplifted 
on ETS routes since 1 January 2024. The ongoing revision of the Energy Taxation Directive is 
expected to increase this incentive further. 

Recognising that non-CO2 aviation effects can no longer be ignored96, a dedicated monitoring, 
reporting and verification framework has been introduced and will start to apply on 1 January 

93 Considering  the  updated  scope  of  aviation  in  the  EU  ETS  (without  incoming  flights  from  the  UK).  Data  from  aircraft 
operators administered by Switzerland is included in 2020-2023 entries only. 

94 These numbers do not take into account all closures of aircraft operators and free allowances from the special reserve for 
new entrants and fast-growing operators, nor returns in 2012 due to the change in scope. Sources: EUTL, DG Climate Action. 

95 Taking into account the numbers withheld due to closures of aircraft operators, the real allocation for 2019 would be 4 million 
below  the  figure  provided  (see  footnote  8  in  Notice  C/2020/8643,  OJ  C  428,  11.12.2020).  The  allocation  for  
the  UK  (4.31 million  allowances  of  the  total  for  2019)  was  suspended in 2019  due  to  the  safeguard  measures  adopted  by  
the Commission 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. The allocation resumed in 2020. 

96 The overall impact of global aviation on climate is considerably higher than the CO2 component alone. The overall impact 
of aviation is estimated to be two to four times that of CO2 emissions when the non-CO2 effects are considered. Addressing 
these emissions is relevant as the Intergovernmental Panel on Climate Change (IPCC) has singled out international aviation 
(and shipping), in its Sixth Assessment Report on mitigation of climate change, as sectors with climate goals that fall short of 
what would be required to curb global temperature increase in line with the Paris Agreement. 

36 

 
 
 
2025.  The  implementing  rules  were  set  out  in  the  second  revision  of  the  Monitoring  and 
Reporting Regulation, adopted on 29 August 202497.  

10.  Maritime transport 

Maritime transport is a major emitter of CO2, accounting for around 3-4% of the EU’s total 
CO2 emissions, i.e. over 126 Mt in 2023, when considering all emissions from voyages to and 
from EEA ports. The 2023 revision of the ETS Directive extended the EU ETS to emissions 
from maritime transport activities, as from 1 January 2024. Maritime transport emissions are 
included in the scope of the EU ETS for 50% of emissions from voyages starting or ending 
outside of the EEA and 100% of emissions that occur between two ports and when ships are 
within an EEA port. Taking this scope into consideration the EU ETS covered 85 Mt CO2 from 
maritime transport in 2023.  

This extension of the EU ETS builds on the provisions in place for other sectors it covers as 
well  as  Maritime  MRV  Regulation  (Regulation  2015/757  on  the  monitoring,  reporting  and 
verification of GHG emissions from maritime transport)98. In 2024 and 2025 (the first 2 years 
of implementation), the EU ETS will cover CO2 emissions from large ships calling at  EEA 
ports, regardless of the flag they fly. This will be extended to CH4 (methane) and N2O (nitrous 
oxide) emissions as from 2026.  

The  obligation  for  the  maritime  sector  to  surrender  allowances  for  their  emissions  under  
the EU ETS will be introduced gradually. During an initial phase-in period, shipping companies 
will  be  obliged  to  surrender  allowances  only  for  a  portion  of  their  emissions,  according  to  
the following timeframe: 

-  2025: for 40% of their emissions reported in 2024; 

-  2026: for 70% of their emissions reported in 2025;  

-  2027 onwards: for 100% of their reported emissions in 2026 and later years.  

To ensure the environmental integrity of the EU ETS, when fewer allowances are surrendered 
compared to the verified emissions from maritime transport in 2024 and 2025, Member States 
will cancel the number of allowances corresponding to that difference.  

The  revision  of  the  Maritime  MRV  Regulation  and  the  relevant  secondary  legislation  was 
finalised  in  2023.  In  total,  eight  implementing  and  delegated  acts  were  adopted99  to  make  
the EU ETS for maritime transport operational as from 2024. The Commission, supported by 

97 New monitoring rules agreed for the EU ETS, including non-CO₂ emissions from the aviation sector, DG Climate Action, 
30.8.2024 

98 Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 on the monitoring, reporting and 
verification of greenhouse gas emissions from maritime transport, and amending Directive 2009/16/EC (OJ L 123, 19.5.2015) 

99  These  include  Implementing  Regulation  (EU)  2023/2297,  Implementing  Regulation  (EU)  2023/2449,  Implementing 
Regulation (EU) 2023/2599, Delegated Regulation (EU) 2023/2776, Delegated Regulation (EU) 2023/2849,  Implementing 
Decision (EU) 2023/2895, Delegated Regulation (EU) 2023/2917, Implementing Decision (EU) 2024/411.  

37 

 
 
 
the  European  Maritime  Safety  Agency,  has  been  helping  stakeholders  with  implementation 
through communication and awareness initiatives, including guidance documents100.  

The inclusion of emissions from maritime transport in the EU ETS is part of the EU’s overall 
strategy to decarbonise the sector. As with all the maritime-related legislation of the ‘Fit for 
55’ package101, it will incentivise energy efficiency and low-carbon solutions, as well as help 
reduce the price difference between alternative low-carbon fuels and traditional fossil maritime 
fuels.  Ships  falling  under  the  scope  of  the  EU  ETS  will  submit  emission  data  for  the  first 
reporting period (2024) by 31 March 2025 and surrender the corresponding number of emission 
allowances by 30 September 2025. Just as for other EU ETS sectors, the competent authorities 
in the Member States will be primarily responsible for implementing the system. This entails 
inspection and enforcement activities as well as approval of the monitoring plans, submitted 
by ships, once assessed by accredited verifiers.  

The ETS Directive includes a reporting and review clause to monitor the implementation of 
the EU ETS for maritime transport, in particular to detect and address any evasive behaviour 
at  an  early  stage,  and  to  assess  relevant  developments  in  the  International  Maritime 
Organization, where the EU is supporting the development of a global GHG emission pricing 
mechanism  for  shipping  together  with  a  fuel  standard  regulating  the  phased  reduction  of  
the marine fuel's GHG intensity. In addition, in 2026 the Commission will review the EU ETS 
for maritime transport and explore a potential extension of its scope to ships below 5 000 gross 
tonnage but not below 400 gross tonnage.   

11.  EU ETS implementation framework  

A smoothly functioning and environmentally credible EU ETS hinges on a robust framework 
of monitoring, reporting, verification and accreditation requirements. These requirements are 
harmonised in the Monitoring and Reporting Regulation and the Accreditation and Verification 
Regulation (Regulation 2018/2067)102. Countries are required to report on their implementation 
of these Regulations and of the ETS Directive every year.  

This chapter relies on the data on the implementation of the EU ETS that countries report every 
year under Article 21 of the ETS Directive (deadline of 30 June). By 25 October 2024, the day 
this report was finalised, Italy had still not submitted their report for 2023. In the absence of 
the latest data for Italy, this chapter uses the data reported by Italy for 2022 as a proxy to make 
year-to-year comparison possible. For all other countries, 2023 data is used. 

100 See Commission’s website Reducing emissions from the shipping sector for further information.  

101 In addition to the extension the EU ETS to maritime transport, these measures include an initiative to boost demand for 
sustainable alternative fuels (the FuelEU Maritime initiative amending Directive 2009/16/EC), and the revision of existing 
directives on energy taxation (Directive 2003/96/EC), alternative fuel infrastructures (Directive 2014/94/EU), and renewable 
energy (Directive (EU) 2018/2001). 

102  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). The regulation was amended in 2020 by Commission Regulation (EU) 2020/2084 and in 2024 by Regulation 
(EU) 2024/1321. See consolidated text. 

38 

 
 
 
11.1. 

Monitoring and reporting of emissions  

The emissions monitoring system in the EU ETS relies on a building-block approach. It gives 
operators a high degree of flexibility, therefore ensuring both the cost-efficiency and reliability 
of emissions data. Operators may use several monitoring approaches (‘calculation-based’ or 
‘measurement-based’ and by exception the ‘fall-back approach’), including a combination of 
methods for individual parts of an installation. For aircraft operators, only calculation-based 
approaches are allowed, with fuel consumption being the central flight parameter.  

The Monitoring and Reporting Regulation requires both installations and aircraft operators to 
have a monitoring plan approved by the national competent authority. This prevents them from 
making an arbitrary selection of monitoring methodologies and temporal variations. In 2023, 
5 countries103 (same as in 2022) continued to allow installations to use simplified monitoring 
plans in low-risk cases104. For aviation, this provision is no longer in use for operators with low 
emissions in any country.  

Most installations have fully complied with the legal requirements for emissions monitoring. 
Most  used  the  calculation-based  methodology105  to  calculate  their  emissions.  Only  
151  installations  (1.8%)  in  22  countries  reported  using  continuous  emissions  measurement 
systems (CEMS), 7 more than in 2022. Of these, 94 installations used CEMS to measure CO2 
emissions, 43 to measure N2O and 14 to measure both gases. CEMS is used most frequently in 
Germany  and  Czechia.  In  39  installations,  the  measured  emissions  also  contained  biogenic 
CO2. Of the installations using CEMS, 72 used the methodology for more than 95% of their 
emissions,  while  the  other  79  used  a  combination  of  CEMS  and  a  calculation-based 
methodology. 

Only  10  countries  reported  using  the  fall-back  approach.  This  approach  was  used  for  
23 installations covering approximately 2.6 Mt CO2eq (4 fewer installations than in 2022 but 
similar  in  emissions’  terms).  One  installation  in  the  Netherlands  is  responsible  for  56%  of  
the overall emissions reported using the fall-back methodology due to its complex set-up.  

Most  installations  met  the  minimum  tier  requirements106  of  the  Monitoring  and  Reporting 
Regulation in 2023. Only 98 category C installations (up from 96 in 2022) were reported to 
have deviated in at least one parameter from the requirement to apply the highest tiers for major 
source streams. They were located in 17 different countries (same as in 2022) and represented 
15.9%  of  category C  installations.  These  deviations  are  only  authorised  when  the  operator 
demonstrates that meeting the highest tier is  not technically feasible or incurs unreasonable 

103 These Member States were Denmark, Finland, Hungary, Lithuania, and the Netherlands. Croatia no longer reports using 
simplified reporting. 

104 Article 13 of the Monitoring and Reporting Regulation 

105 The main reason for this is that the measurement-based methodology involves significant resources and know-how, which 
many smaller operators lack. 

106 The Monitoring and Reporting Regulation requires all operators to meet certain minimum tiers. Installations emitting more 
than 50 kt of CO2 are required to meet the highest tier for major source streams (meaning more reliable data quality, while less 
strict requirements apply to smaller sources for cost-efficiency reasons. 

39 

 
 
 
costs. Once these conditions no longer apply, the operator must improve the monitoring system 
accordingly. 

The Monitoring and Reporting Regulation was first amended in October 2023 to implement 
the  2023  revision  of  the  ETS  Directive107.  Key  amendments  related  to  the  monitoring  and 
reporting  rules  for  the  new  ETS2  (see  Chapter  2).  In  addition,  the  updated  rules  reflect  
the obligation for installations for the incineration of municipal waste to monitor and report 
their emissions under the EU ETS as from 2024. The amendments concerning installations and 
aviation apply since 1 January 2024, while the rules for ETS2 entered into force in July 2024. 

The second revision of the Monitoring and Reporting Regulation was adopted on 29 August 
2024108. It introduces monitoring and reporting requirements for non-CO2 aviation effects per 
flight  and  on  how  to  zero-rate  emissions  from  the  combustion  of  renewable  fuels  of  non-
biological  origin  (RFNBOs),  recycled  carbon  fuels  (RCFs)  and  synthetic  low  carbon  fuels 
under the ETS. Demonstration of compliance with sustainability and emission savings criteria 
is a key condition for the zero-rating of emissions. The revised Regulation also improves upon 
the existing rules, including those on the monitoring and reporting on the transfer of CO2 by 
means  other  than  pipelines  and  on  CO2  considered  to  be  permanently  chemically  bound  in  
a product.  

Amendments have also been made to regulate how the use of a recently established EU-wide 
database for biofuels109 can be a way to demonstrate compliance with the sustainability and 
emission saving criteria. Additional detailed monitoring and reporting requirements have been 
introduced  to  cover the  use of  alternative  aviation  fuels,  the harmonisation  of small  emitter 
thresholds and the treatment of biomass/RFNBOs/RCF in aviation. The second revision of the 
Monitoring  and  Reporting  Regulation  also  advances  the  implementation  of  the  ETS2, 
addressing amendments outstanding from the first revision, to promote further harmonization, 
to  reduce  the  administrative  burden  for  operators  and  national  authorities  and  to  improve  
the system’s overall efficiency.   

The Maritime MRV Regulation was revised in 2023110 to prepare for the extension of the EU 
ETS  to  maritime  transport,  notably  to  include  non-CO2  emissions  and  detailed  rules  for 
determining emissions of companies falling within the scope of the EU ETS.   

11.2. 

Verification and Accreditation 

Verifiers of emission reports under the EU ETS must be accredited by a national accreditation 
body  in  line  with  the  Accreditation  and  Verification  Regulation  and  ISO  14065  
(an  international  ISO  standard).  Accredited  verifiers  can  operate  with  mutual  recognition 

107  Commission  Implementing  Regulation  (EU)  2023/2122  of  17 October  2023  amending  Implementing  Regulation  (EU) 
2018/2066 as regards updating the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC 
of the European Parliament and of the Council (OJ L, 2023/2122, 18.10.2023) 

108 Implementing Regulation 2018/2066 - see footnote 7.  

109 See Union Database for Biofuels for further information.  

110 Regulation 2015/757 - see footnote 98.  

40 

 
 
 
across  all  EU  ETS  countries,  taking  full  advantage  of  the  single  market.  This  also  ensures 
sufficient  service  availability  across  the  EU.  A  detailed  overview  of  accreditation  and 
verification aspects in 2023 is included in Table F in Section IV of the accompanying staff 
working document. 

In 2023, there were 105 accredited verifiers for installations and 20 for aircraft operators. In 
addition, 28 countries reported that at least one foreign verifier was active in their territory in 
2023,  and  6  countries  reported  having  only  foreign  verifiers.  This  shows  that  the  mutual 
recognition of verifiers among countries continues to work successfully. 

Verifiers’ compliance with the Accreditation and Reporting Regulation is found to be high. For 
2023,  no  verifier  suspensions  or  withdrawal  of  a  verifier’s  accreditation  were  reported.  In  
2 cases, verifiers’ scope of accreditation was reduced (Finland and Poland). By comparison,  
3 suspensions, 1 withdrawal of accreditation and 1 scope reduction were reported for 2022.  

In parallel to the revision of the Monitoring and Reporting Regulation, the Accreditation and 
Verification  Regulation  was  revised.  The  revision  was  adopted  on  13 May  2024,  ahead  of  
the submission deadline for verified baseline data reports by 30 May 2024. The objective of 
this amendment was:   

•  For free allocation to industry installations:  to specify the verifier’s role in checking  
the implementation of energy efficiency recommendations as one of the conditions for 
free  allocation  of  allowances  and  in  checking  whether  any  derogations  to  this 
conditionality apply under Article 22a of the Free Allocation Regulation.  

•  For ETS2: to extend the application of the Regulation to the verification for ETS2 (e.g. 
introduction of new accreditation scope for ETS2, specific rules on when to waive site 
visits, the verifier’s role in checking double counting between the two systems). 

•  Align the Accreditation and Verification Regulation with the revised Monitoring and 
Reporting Regulation for the aviation sector: to provide clarity on the verifier’s role in 
assessing  compliance  with  Articles 54  and 54a  of  the  Monitoring  and  Reporting 
Regulation,  which  include  specific  requirements  on  how  to  attribute  sustainable 
aviation fuels and their emissions to flights.   

•  To improve existing requirements in the Accreditation and Verification, for example 
by allowing verifiers to carry out  virtual  site visits  for the aviation  sector outside of  
the exceptional circumstances.  

The second revision of the Accreditation and Verification Regulation is underway. It will cover 
the accreditation and verification requirements for the non-CO2 aviation effects, the verifier’s 
role in verifying the achievement of milestones and targets included in installations’ climate 
neutrality  plans  and  other  changes  introduced  in  the  second  revision  of  the  Monitoring  and 
Reporting Regulation. 

41 

 
 
 
11.3. 

Guidance documents 

The  Commission  has  developed  guidance  documents111  for  the  monitoring,  reporting, 
verification and accreditation. The aim is to provide detailed instructions, techniques and best 
practices 
to  competent  authorities,  operators,  verifiers  and  other  stakeholders  on  
the implementation of the EU ETS. This guidance plays a vital role in ensuring the integrity, 
transparency,  harmonisation  and  accuracy  of  the  emissions  data  within  the  EU  ETS.  As 
methodologies  and  technologies  evolve,  applying  best  practices  and  new  techniques  helps 
reduce  errors  and  supports  the  system's  overall  effectiveness  in  reducing  GHG  emissions. 
These  documents  will  be  updated  to  reflect  the  revisions  of  the  Monitoring  and  Reporting 
Regulation  and  the  Accreditation  and  Verification  Regulation.  Priority  will  be  given  to  
the general guidance documents for installations, for aircraft operators, as well as the guidance 
on biomass and renewable fuel issues. 

11.4. 

National competent authorities 

How  national  competent  authorities  organise  themselves  to  implement  the  EU  ETS  differs 
between countries. In some countries, multiple local authorities are involved, while in others 
implementation  is  more  centralised.  Countries  choose  these  approaches  based  on  cost-  and 
time-effectiveness.  An  overview  of  the  coordination  between  competent  authorities 
implementing the EU ETS is presented in Table G in Section IV of the accompanying staff 
working document. 

All countries reported having at least one central competent authority involved in implementing 
the EU ETS in 2023. In 14 countries, only a single, central competent authority was responsible 
for  all  EU  ETS  activities.  Where  multiple  competent  authorities  are  managing  EU  ETS 
activities,  countries  reported  using  one  or  more  different  solutions  and  tools  to  coordinate  
the  work  between  those  authorities.  These  solutions  and  tools  include  a  central  competent 
authority being responsible for the monitoring, reporting, accreditation and verification work 
(12  countries),  playing  a  coordinating  role112  (10  countries),  a  central  competent  authority 
issuing  binding  instructions  and  guidance  to  local  authorities  (5  countries),  providing  joint 
training  for  competent  authorities  (8  countries)  and  convening  regular  working  groups  or 
meetings between authorities (13 countries).  

In  2023,  16  countries  did  not  charge  administrative  fees  to  installation  operators  for  
the permitting and approval of monitoring plans (the same as in 2022). Aircraft operators in  
17  countries  also  did  not  have  to  pay  any  fees  (the  same  as  in  2022).  Charges  varied 
significantly by country and type of service – from about EUR 19 to EUR 8 442 for a permit 
and approval of a monitoring plan for installations, and from about EUR 2 to EUR 4 100 for 
aircraft operators. Except for Czechia, countries reported also charging administrative fees of 
different amounts for significant changes to monitoring plans. An overview of administrative 

111 Monitoring, reporting and verification of EU ETS emissions, DG Climate Action, 31.8.2024 

112 Where  regional/local  authorities  are  responsible  for  MRV  work,  the  central  competent  authority  also  reviews  relevant 
documents (such as monitoring plans) to monitor the quality of MRV processes. 

42 

 
 
 
charges in the EU ETS is presented in Table H in Section IV of the accompanying staff working 
document. 

11.5. 

Compliance with the EU ETS  

Compliance  with  the  EU  ETS  is  checked  in  annual  cycles.  For  every  year  of  operation,  
an  operator  must  submit  an  annual  emissions  report  by  31 March  the  following  year.  Once  
a verified report is checked by a competent authority, an operator must surrender the number 
of allowances equivalent to its verified emissions by 30 September the same year113.  

For  each  tonne  of  CO2  emitted  for  which  no  allowance  was  surrendered  on  time,  the  ETS 
Directive  imposes  a  penalty  of  EUR 100114.  This  is  on  top  of  the  cost  of  surrendering 
allowances due. Other penalties may also apply to infringements of the EU ETS legislation.  

A detailed overview of compliance with the EU ETS is presented in Tables I-K in Section IV 
of the accompanying staff working document.  

In the 2023 compliance cycle, the level of compliance with the EU ETS remained very high. 
In most years, operators responsible for over 9% of emissions from installations and aviation 
met their legal obligations on time. The efficiency of the compliance system has improved, 
with a broader uptake of electronic reporting. In 2023, 12 countries used automated IT systems 
and  electronic  templates  for  monitoring  plans,  emission  reports,  verification  reports  and/or 
improvement reports. Nine countries also used automated IT systems to manage the workflow 
for  monitoring  methodology  plans,  annual  activity  level  reports  and  other  information 
exchanges on allocation data. 

Due to exceptional circumstances, 9 countries (6 in 2022) allowed verifiers to carry out virtual 
site visits115. For 7 installations and 11 aircraft operators, virtual site visits were approved by 
the relevant competent authority. 

Compliance  checks  on  installations’  annual  emissions  reports  vary  between  competent 
authorities. In 2023, all competent authorities checked the completeness of the reports from 
installations,  and  most  did  so  for  reports  from  aircraft  operators.  The  exceptions  were  
the competent authorities in Greece and Latvia (with 10 and 2 aircraft operators, respectively), 
as well as Liechtenstein and Northern Ireland because these two countries do not administer 
any aircraft operators. 

Competent  authorities  in  10  countries  made  conservative  estimates  for  47  installations 
(approximately  0.6%  of  all  installations,  down  from  0.7%  in  2022).  Out  of  4.2  Mt  CO2eq 

113  In  the  2023  revision  of  the  ETS  Directive,  the  deadline  to  surrender  allowances  has  been  moved  from  30 April  to 
30 September (applicable from 2024 onward). 

114 The penalty is indexed for inflation. 

115 Article 34a of the Accreditation and Verification Regulation allows the verifier to carry out a virtual site visit if a force 
majeure situation prevents the verifier from going to the site. This is only allowed subject to the competent authority’s approval 
and if certain conditions have been met. 

43 

 
 
 
reported by the 47 installations, 2.1 Mt were estimated conservatively (compared to 1.0 Mt out 
of 2.4 Mt in 2022 CO2eq reported by 61 installations).  

Conservative estimates were made when the annual emissions reports were not submitted in 
time, when a negative verification opinion was issued, or when an emissions report did not 
comply with the Monitoring and Reporting Regulation116. For 15 installations, all emissions 
were estimated conservatively. For 10 installations, a conservative estimation covered only part 
of  emissions.  17  installations  were  estimated  to  have  generated  no  emissions  and  for  
the remaining 5 installations, the conservative estimation process was still ongoing at the time 
this report was being finalised. 

Conservative  estimates  for  aviation  were  reported  by  3  countries117  (5  in  2022)  concerning  
22 aircraft operators (33 in 2022) and 0.06 Mt CO2eq (0.31 Mt CO2eq in 2022).  

Checks by competent authorities remain important to supplement verifiers’ work. In addition 
to  checking  emissions  reports,  19  countries  reported  that  they  had  carried  out  on-site 
inspections  at  installations  (one  more  than  in  2022).  Three  countries118  reported  on-site 
inspections for aviation (the same as in 2022).  

In 2023, 38 installations in 10 countries119 were fined for not surrendering sufficient emission 
allowances to cover their reported emissions (excess emissions). For aviation, excess emissions 
penalties  were  reported  by  4  countries  for  9  aircraft  operators.  14  countries120  reported  
75  infringements,  which  resulted  in  penalties,  formal  warnings  or  formal  notices,  including 
some but not all excess emissions cases. A total of 43 fines were reported (either issued or to 
be issued for example due to ongoing legal proceedings), amounting to EUR 88.8 million. This 
included  aviation,  with  9  infringements  in  4  countries,  leading  to  7  fines,  for  a  total  of 
EUR 0.6 million. Most of the fines come from excess emissions penalties. 

The most common infringements reported for 2023 were a failure to submit an emissions report 
(23 cases) or an activity level report (18 cases) in due time, a failure to notify changes or update 
the monitoring plan (7 cases) and operating without an emissions permit (7 cases).  

116 Article 70 of the Monitoring and Reporting Regulation 

117 Data reported by Italy for 2022 used as proxy - see page 38 of this report. 

118 A further two countries (Liechtenstein and Northern Ireland) do not administer any aircraft operators. 

119 Data reported by Italy for 2022 used as proxy - see page 38 of this report. 

120 The 14 countries are Czechia, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, 
Poland, Spain and Sweden. For Italy, data reported for 2022 was used as proxy. Data reported by Italy for 2022 used as proxy 
- see page 38 of this report. 

44 

 
 
 
 
 
 
12.  EU ETS in the context of the EU’s climate and energy governance  

The EU ETS operates within the broader context of the EU’s climate and energy governance, 
including the Energy Efficiency Directive (Directive 2023/1791)121, which has been recast as 
part of the ‘Fit for 55’ package of reforms. The aim of the Directive is to achieve energy savings 
by laying down targets and obligations for Member States and companies. The carbon price 
signal of the EU ETS is a consideration in the choice of policy measures and actions to that 
end. Article 35(1) of the Energy Efficiency Directive requires that the Commission’s annual 
report on the functioning of the European carbon market (this report) takes into consideration 
the implementation of that Directive. 

The  revised  Energy  Efficiency  Directive  introduces  new  rules  to  reduce  final  energy 
consumption  at  EU  level  by  11.7%  by  2030,  compared  to  the  projections  of  the  2020  EU 
reference scenario. All Member States are required to contribute to achieving this target. To 
this  end,  they  set  out  indicative  national  contributions  and  trajectories  in  their  updated 
integrated  national  energy  and  climate  plans  (NECPs)  under  the  Governance  Regulation. 
Member States submitted their draft updated NECPs in 2023 and the final plans were due by 
30 June 2024. 

The carbon price signal of the EU ETS feeds into the appraisal of energy efficiency-related 
investments and measures in the sectors covered. Member States also use auction revenue from 
the  EU  ETS  to  fund  energy  efficiency  improvements.  In  2023,  20  Member  States  reported 
spending  EUR 2.3 billion  to  fund  projects  related  to  energy  efficiency.  Those  included 
investments  in  the thermal  modernisation  of  public and private buildings, energy efficiency 
advice,  efficient  public  lighting,  efficient  heating  and  cooling  systems  including  district 
heating,  as  well  as  research  and  development,  all  with  the  objective  to  reduce  energy 
consumption.  

13.  Link between the EU ETS and the Swiss ETS 

Since  2020,  the  EU  ETS  and  the  Swiss  ETS  have  been  linked  through  an  international 
agreement between the EU and the Swiss Confederation. This means that allowances issued in 
one  system  can  be  surrendered  for  emissions  generated  in  either  of  the  two  systems.  With 
access to a larger market, operators can make cost-efficiency gains and have more options for 
emissions  abatement.  The  Linking  Agreement122  sets  out  the  conditions  and  requirements 
under  which  the  two  systems  are  linked.  It  also  establishes  a  mechanism  to  ensure  that  
the linking conditions of Article 25 of the ETS Directive are respected.  

Including  aviation  in  the  Linking  Agreement  was  a  crucial  requirement  for  the  EU.  Under 
Article 6 of the Agreement, Switzerland applies the same approach to the rules on coverage, 

121 Directive (EU) 2023/1791 of the European Parliament and of the Council of 13 September 2023 on energy efficiency and 
amending Regulation (EU) 2023/955 (recast) (OJ L 231, 20.9.2018) 

122 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). 

45 

 
 
 
cap and allocation as the EU ETS. In line with Article 7 of the Linking Agreement, this will 
continue under the revised ETS Directive.  

Swiss domestic flights and flights departing to EEA airports are covered by the Swiss ETS, 
while flights departing from the EEA to Switzerland fall under the EU ETS. This arrangement 
increases the environmental integrity of both systems. Both the EU ETS and the Swiss ETS 
have applied the same approach for incoming and outgoing flights from and to the UK since 
Brexit. Following the revision of the EU ETS Directive in 2023, the scope of both systems has 
been extended to cover the flights to/from the EU’s outermost regions. 

Tables L-M in Section V of the accompanying staff working document show key figures for 
both  systems  in  2023  –  auctioned  allowances,  free  allocation  and  verified  emissions  for 
installations and aircraft operators. When compared, they demonstrate that the compatibility of 
the  two  systems  is  not  a  matter  of  size  but  of  qualitative  requirements,  level  playing  field 
conditions and measures to safeguard market integrity.  

In  line  with  the  Linking  Agreement,  a  direct  link  has  been  created  between  both  systems’ 
registries  to  allow  transfers  of  allowances  between  the  two  systems.  It  allows  market 
participants to execute the transactions between the two systems as if they were in one market, 
thus  improving  liquidity  in  the  linked  market.  Transfers  between  systems  (registries)  are 
performed daily, Monday to Friday, except for specific dates tied to bank holidays. 

Table 9 and Table 10 present the effects of the link between the EU ETS and the Swiss ETS in 
2023. They show to what extent regulated entities in both systems used allowances issued in 
the other system for compliance. 

In  total,  regulated  entities  in  the  EU  ETS  (both  installations  and  aircraft  operators)  used 
1 140 848  allowances  issued  under  the  Swiss  ETS  for  compliance  in  2023.  This  is  nearly 
170 000  allowances  more  than  in  2022  and  almost  550 000  allowances  more  than  in  2021, 
marking  an  increased  use  of  the  flexibility  provided  by  the  link  between  the  EU  ETS  and  
the Swiss ETS and a consistently growing awareness and acceptance of the link. 

While installations in the EU ETS used fewer aviation allowances issued under the Swiss ETS 
than in the previous year (around 100 000 in  2023 compared to  180 000 in  2022), this was 
partly compensated by an increased in the use of the Swiss ETS general allowances (around 
425 000 in 2023 compared to 395 000 in 2022). 

The number of the Swiss ETS general allowances used for compliance by EU aircraft operators 
in 2023 increased slightly to around 50 000 (compared to 40 000 in 2022). More impressively, 
the number of the Swiss ETS aviation allowances used for compliance by aircraft operators in 
the EU ETS increased significantly from around 355 000 in 2022 to 560 000 in 2023. In relative 
terms,  allowances  issued  under  the  Swiss  ETS  accounted  for  around  0.10%  of  the  total 
allowances surrendered in the EU ETS in 2023. However, they accounted for a bigger share of 
21.64% of all the Swiss ETS allowances allocated for free and auctioned that year. 

46 

 
 
In  the  Swiss  ETS,  installations  used  a  higher  share  of  the  EU  ETS  general  allowances  for 
compliance in 2023 (11.6%) compared to 2022 (6.2%). In both years, installations in the Swiss 
ETS did not use the EU ETS aviation allowances for compliance. 

Table 11 aggregates the volume of allowances (both general and aviation) transferred on behalf 
of market participants between the EU ETS and the Swiss ETS since 2020. So far, 2023 saw 
the highest number of aggregate total transfers. The current historical balance shows an outflow 
of 1 268 426 allowances from the EU ETS to the Swiss ETS. It should, however, be noted that 
the figures may include re-transfers of the same allowances. 

47 

 
 
Table 6. Units used for compliance in the EU Registry in 2023. Data extracted from the EU Registry on 1 October 2024. 

s
n
o
i
t
a
l
l
a
t
s
n
I

s
r
o
t
a
r
e
p
o

t
f
a
r
c
r
i
A

Free allocation  
and auctioning 

Verified emissions 

Surrendered units 

EU ETS allowances 

Swiss ETS allowances 

General 

Aviation 

General 

Aviation 

1 055 030 682 

1 096 788 327 

1 099 802 112 

1 095 206 929 

4 068 223 

425 611 

101 349 

% of the total 

99.58 

0.37 

0.04 

0.01 

Free allocation (including 
Swiss ETS)  
and auctioning 

Verified emissions 
(including under  
the Swiss ETS) 

Surrendered units 

EU ETS allowances 

Swiss ETS allowances 

General 

Aviation 

General 

Aviation 

28 261 053 

54 128 536 

54 186 768 

34 756 873 

18 816 007 

51 865 

562 023 

% of the total 

64.14 

34.72 

0.10 

1.04 

Table 10. Units used for compliance in the Swiss Registry in 2023. Aircraft operators refer to those administered by Switzerland.  

s
n
o
i
t
a
l
l
a
t
s
n
I

s
r
o
t
a
r
e
p
o

t
f
a
r
c
r
i
A

Free allocation  
and auctioning 

Verified emissions 

Surrendered units 

EU ETS allowances 

Swiss ETS allowances 

General 

Aviation 

General 

Aviation 

4 177 117 

3 912 485 

3 904 451 

452 906 

11.60 

0 

- 

3 419 042 

32 503 

87.57 

0.83 

Free allocation (including 
EU ETS) and auctioning 

% of the total 

Verified emissions 
(including under  
the EU ETS) 

Surrendered units 

EU ETS allowances 

Swiss ETS allowances 

General 

Aviation 

General 

Aviation 

1 095 995 

1 632 015 

1 630 901 

118 408 

714 629 

17 747 

780 117 

% of the total 

7.26 

43.82 

1.09 

47.83 

48 

 
 
 
 
 
 
 
 
Table 11. Transfers of allowances between the EU ETS and the Swiss ETS (2020 -2023). 

Year 

2020 

2021 

2022 

2023 

Total 

Transfer from the EU ETS 
to the Swiss ETS 

Transfer from the 
Swiss ETS to the EU ETS 

475 679 

1 051 360 

1 714 499 

2 603 612 

5 845 150 

0 

1 523 770 

1 215 662 

1 837 292 

4 576 724 

Balance 

1 268 426 

14.  Summary  

The  EU  ETS  in  2023  was  marked  by  a  historical  reduction  in  emissions  from  installations 
driven by the power sector, where renewable electricity production (primarily wind and solar) 
increased substantially, and the trend of gas replacing coal in power generation was resumed. 
With this development, ETS emissions from installations are around 47.6% below 2005 levels 
and well on track to achieve the 2030 target of -62%.  

Farther  reaching  emission  reductions  in  the  EU  ETS  in  2023  have  been  facilitated  by  
a sustained robust carbon price signal. In ESMA’s assessment, the EU carbon market remained 
stable in 2023 and continued to operate in line with market fundamentals. Also, most of the 
recommendations issued by ESMA in 2022 to enhance the transparency of the carbon market 
are now considered implemented.  

Emission  developments  confirm  the  effectiveness  and  efficiency  of  the  EU  ETS  as  one  of  
the  main  policy  incentives  for  the  decarbonisation  of  the  European  economy.  The  EU  ETS 
revenue  also  remains  an  important  source  of  funding  for  this  transformation,  with 
EUR 43.6 billion raised in 2023 and distributed primarily to national budgets, but also the ETS 
Innovation Fund and the ETS Modernisation Fund, as well as the RRF for the REPowerEU 
plan. The total revenue raised by the EU ETS to date exceeds EUR 200 billion.  

Further effort is needed both to reduce emissions and to transform the EU’s economy in line 
with European Climate Law targets and European Green Deal objectives. The EU ETS was 
revised in 2023 to support this effort. The cap on emissions has been tightened, while the scope 
of  the  system  has  been  expanded  to  the  EU’s  fair  share  of  CO2  emissions  from  maritime 
transport. The system has also been strengthened for aviation. A new system, ETS2, has been 
created  to  help  advance  emission  reductions  from  buildings,  road  transport  and  additional 
sectors. The revision is fully in force, and the Commission and Member States continue to work 
on its implementation.   

49