REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the functioning of the European carbon market in 2024
Date: 2025-12-03
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, 3.12.2025  COM(2025) 735 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the functioning of the European carbon market in 2024 {SWD(2025) 388 final}  
 
 
Table of Contents 
1. 

Introduction ..................................................................................................................................... 3 

2.  State of play of the EU ETS ............................................................................................................ 4 

2.1. 

Scope and coverage ............................................................................................................... 4 

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

2.2. 
sectors  5 

2.3. 

Social Climate Fund .............................................................................................................. 5 

2.3.1. 

Social climate plans ...................................................................................................... 6 

3.  Cap on emissions ............................................................................................................................ 7 

4.  Auctioning of allowances.............................................................................................................. 10 

4.1. 

4.2. 

4.3. 

Auctioning and cancellation of allowances due to maritime scope expansion of the EU ETS
11 

Effort Sharing Regulation flexibility ................................................................................... 12 

Voluntary cancellation of allowances .................................................................................. 12 

5.  Free allocation of allowances ........................................................................................................ 13 

5.1. 

Carbon Border Adjustment Mechanism .............................................................................. 15 

6.  EU carbon market ......................................................................................................................... 16 

6.1. 

Balancing supply and demand ............................................................................................. 16 

6.2.  Market oversight .................................................................................................................. 17 

7.  Emission trends ............................................................................................................................. 20 

7.1. 

Emissions from fossil fuel combustion in installations ....................................................... 21 

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

8.1. 

8.2. 

8.3. 

8.4. 

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

ETS Innovation Fund........................................................................................................... 28 

ETS Modernisation Fund..................................................................................................... 30 

ETS Decarbonisation Fund for Greece ................................................................................ 31 

9.  Aviation ......................................................................................................................................... 32 

10.  Maritime transport ................................................................................................................... 35 

11. 

EU ETS implementation framework........................................................................................ 36 

11.1.  Monitoring and reporting of emissions ............................................................................... 36 

11.1.1.  Monitoring and reporting of emissions from municipal waste incineration ............... 37 

11.1.2.  Monitoring and reporting of non-CO2 aviation effects .............................................. 37 

11.2.  Verification and accreditation ............................................................................................. 38 

11.3.  Guidance documents............................................................................................................ 39 

11.4.  National competent authorities ............................................................................................ 39 

11.5.  Compliance with the EU ETS ............................................................................................. 40 

11.6. 

Implementation framework for maritime transport ............................................................. 41 

11.6.1.  Monitoring and reporting of emissions ....................................................................... 42 

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11.6.2. 

Verification and accreditation ..................................................................................... 42 

11.6.3. 

Administering authorities ........................................................................................... 43 

11.6.4. 

Compliance with the EU ETS for maritime transport ................................................. 43 

11.6.5. 

Implementation of ETS2 ............................................................................................. 43 

12. 

13. 

14. 

EU ETS in the context of the EU’s climate and energy governance ........................................ 43 

Link between the EU ETS and the Swiss ETS ........................................................................ 44 

Summary .................................................................................................................................. 48 

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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. In line with the ‘polluter pays’ principle, it puts a 
cap and a price on emissions from the energy, industry and maritime transport sectors and part of the 
aviation sector in Europe. Emissions covered by the EU ETS account for approximately 40% of the 
EU’s total emissions.  

The  cap  ensures  that  emissions  decrease  over  time,  and  the  carbon  price,  determined  by  
the market, provides an incentive for companies to deploy solutions and make investments to reduce 
emissions - where it costs least to do so and in a technologically neutral way. The carbon price also 
determines the revenue that the EU ETS generates. 

Since  its  launch  in  2005,  the  EU  ETS  has  helped  drive  down  emissions  from  electricity  and  heat 
generation and industrial production by 50%1 and is on track to achieve its 2030 target of 62% reduction 
(compared  to  2005).  To  date,  the  system  has  generated  some  EUR 248 billion  in  auction  revenue, 
distributed primarily to national budgets to be used for climate action and energy transformation.  

This  report  takes  stock  of  the  functioning  of  the  EU  ETS  in  2024,  considering  also  relevant 
developments in the first half of 2025. It provides an updated overview of key aspects of the system’s 
framework and highlights annual developments.  

Most  importantly,  the  report  recalls  EU  ETS  trends  in  emissions  and  auction  revenue.  In  2024, 
emissions from power and industry installations under the EU ETS continued to decrease, falling 5.8% 
from 2023 levels. In aviation, intra-European emissions rose 15% compared to 2023, partly due to the 
broadening  of  the  geographical  scope  (re-inclusion  of  non-domestic  flights  involving  outermost 
regions). At the same time,  2024 marked the first year that emissions from maritime transport  were 
included under the EU ETS.  

The  total  revenue  generated  by  the  EU  ETS  in  2024  amounted  to  EUR 38.8  billion.  This  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.  The report  describes  how 
Member States used their ETS revenue in 2024 and summarises  developments under the Innovation 
and Modernisation Funds.  

The report sets out the adjustments to the EU ETS cap that will take effect in 2026 due the planned 
rebasing, expansion of the scope to cover emissions of more greenhouse gases (GHG)  for maritime 
transport and an updated list of small emitters excluded from the system.  

The  report  is  adopted  in  line  with  Articles  10(5)  and  21(2)  of  the  ETS  Directive  (Directive 
2003/87/EC)3. It is based mostly on data from the Union Registry and national reporting. The report is 

1 ETS emissions from installations in the power and industry sectors in 2024, 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 31 August 2025.  

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

3 Directive 2003/87/EC of 13 October 2003, OJ L 275, 25.10.2003, p. 32. 

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accompanied by a staff working document (Technical information). The report was drafted prior to the 
meeting of the Council of the European Union (Environment) on 4-5 November 2025. 

2.  State of play of 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 Ireland4. Since January 2020, the EU ETS has been linked with 
Switzerland’s emissions trading system (Swiss ETS).  

As of 2024, the sectoral scope of the EU ETS covers GHG emissions from over 12.000 entities from: 

• 

• 

electricity and heat generation plants and manufacturing installations in Europe; 

aircraft operators flying between airports in the European Economic Area (EEA) and from the 
EEA to Switzerland and to the United Kingdom;  

•  maritime transport occurring between two EEA ports and when ships are in EEA ports, as well 
as half of emissions from voyages to or from EEA ports that start or end outside the EEA.  

In addition to CO2 emissions, the EU ETS covers emissions of other GHGs from electricity and heat 
generation plants and manufacturing installations. These include: 

•  N2O (nitrous oxide) from nitric, adipic and glyoxylic acids and glyoxal production;  

•  PFCs (perfluorocarbons) from primary aluminium production. 

CH4 (methane) and N2O (nitrous oxide) emissions from maritime transport activities are covered from 
January 2026.  

In  2024,  23  countries  reported  permits  for  ETS  activities  releasing  emissions  other  than  CO2.  Four 
countries declared having included carbon capture and storage activities in installation permits5. 

From  2024,  installations  for  the  incineration  of municipal  waste monitor  and  report  their  emissions 
under  the  EU  ETS.  They  are  not,  however,  required  to  surrender  allowances  for  their  emissions. 
Emissions  from  waste  treatment  are  subject  to  national  reduction  targets  under  the  Effort  Sharing 
Regulation (Regulation 2018/842)6. 

Information about installations, aircraft operators and shipping companies, as well as GHGs reported 
in the scope of the EU ETS (as it stood in 2024) can be found in Section 1 of the accompanying staff 
working document.   

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

5 These countries were Italy, the Netherlands, Norway and Sweden.  

6 Regulation (EU) 2018/842 of 30 May 2018, 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 emissions trading system (ETS2) was created 
to cover CO2 emissions from fuel combustion in buildings, road transport and additional sectors (mainly 
small industry not covered by the existing EU ETS).  

ETS2 is separate from the existing EU ETS. Although both are ‘cap and trade’ systems, ETS2 covers 
emissions  upstream.  This  means  that  fuel  suppliers  (regulated  entities)  are  required  to  monitor  and 
report  emissions  corresponding  to  the  combustion  of  fuels  that  they  release  for  consumption  in  the 
sectors that fall under the scope of ETS2, and to buy and surrender the allowances  corresponding to 
these emissions. From January 2025, the regulated entities falling under ETS2 are required to hold a 
GHG  emissions  permit  and  an  approved  monitoring  plan  for  the  monitoring  and  reporting  of  their 
annual emissions.  

Annual  reporting  of  verified  emissions  will  be  mandatory  for  emissions  released  from  2025,  with 
reports due by 30 April the following year, so emissions for 2025 are to be reported in 2026. Regulated 
entities will have to surrender the number of allowances corresponding to their emissions by 31 May in 
the year of reporting. This obligation may be postponed for one year in the event of exceptionally high 
gas or oil prices in the first half of 2026. See Chapter 11 for the ETS2 implementation framework and 
supporting documents.   

In December 2024, the Commission published the EU-wide quantity of allowances for ETS2 in 2027. 
This cap is set at 1 036 288 784 allowances for 2027, for the EU-27 and the three EEA-EFTA states. 
The ETS2 cap for 2027 was calculated based on the average CO2 emissions from fuel combustion in 
the ETS2 activities from 2016 to 2018. In line with the ETS Directive, that average is reduced up to the 
year 2027 through the following: (i) until 2024, a linear reduction trajectory consistent with the one for 
all emissions within the scope of the Effort Sharing Regulation and (ii) for the years 2025-2027, an 
annual linear reduction factor of 5.1%. 

The  ETS2  cap  applicable  from  2028  will  be  determined  by  June  2027,  based  on  the  average  CO2 
emissions reported by the ETS2 regulated entities for the years 2024 to 2026. Member States can choose 
to unilaterally include in ETS2 CO2 emissions from activities that are not included in the scope of the 
ETS  Directive,  subject  to  approval  by  the  European  Commission.  To  date,  the  Commission  has 
approved the opt-in of additional activities by Austria, Finland, the Netherlands and Sweden. The ETS2 
cap for 2027 will be amended to reflect the additional emissions from national opt-ins. 

The  ETS2  complements  national  emission  reduction  targets  under  the  ESR.  Member  States  must 
implement complementary policies in ETS2 sectors not only to achieve their targets, but also to keep 
ETS2 prices in check. In September 2025, the Commission published an overview of effective policies 
and measures that can help bring down emissions in road transport and building sectors7. 

2.3. Social Climate Fund 

The Social Climate Fund (SCF) was created alongside ETS2 to provide Member States with funding to 
address the social impacts arising from the inclusion of the buildings and road transport sectors in the 

7 New study provides toolbox for early decarbonisation in ETS2 sectors, DG Climate Action, 9.9.2025.  

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new system and to support the most vulnerable groups, particularly households in energy or transport 
poverty.  

The Fund will make EUR 65 billion (in current prices) available over the period 2026-2032, financed 
via externally assigned revenue generated primarily from auctioning ETS2 allowances as well as from 
auctioning 50 million allowances from the existing EU ETS (started already in 2025). Each Member 
State’s financial allocation of the Fund has been established based on emissions, population profile and 
energy and transport poverty and relative prosperity indicators. Member States should have submitted 
national Social Climate Plans to the Commission for approval by 30 June 2025, setting out how they 
intend to spend their SCF resources. Including a mandatory minimum 25% contribution by Member 
States to their plans, the SCF will mobilise at least EUR 86.7 billion.  

2.3.1. 

Social climate plans 

The social climate plans should include an analysis of the likely effects of ETS2 on vulnerable groups, 
as  well  as  structural  measures  and  investments  to  mitigate  those  effects,  targeting  the  identified 
vulnerable  groups.  The  measures  and  investments  could  cover  improving  energy  efficiency  and 
renovating buildings, developing clean heating and cooling and integrating renewable energy, as well 
as  deploying  zero-emission  and,  in  duly  justified  cases,  low-emission  mobility  solutions,  including 
public transport.  

All measures and investments must respect the ‘do no significant harm’ (DNSH) principle regarding 
the six environmental objectives outlined in the Taxonomy Regulation (Regulation 2020/852). Member 
States also have the option of spending a limited part of their SCF allocation on temporary direct income 
support.  Additionally,  Member  States  must  ensure  policy  coherence  with  their  national  energy  and 
climate plans (NECPs), and the Social Climate Plans may include accompanying measures to reinforce 
coherence and strengthen incentives for clean alternatives. 

Already in 2023, the Commission set up a dedicated expert group with Member States representatives 
to  discuss  and  exchange  best  practice,  which  meets  on  a  regular  basis.  The  Commission  has  also 
published several thematic notes and guidance documents. Two notes on best practice for cost-effective 
measures and investments and appropriate public consultations were published in June 2024. In March 
2025, two guidance documents were published on preparing the social climate plans and on applying 
the  DNSH  principle.  The  latest  guidance  document  on  the  monitoring  and  implementation  was 
published in October 20258. In addition, the Commission has set up a platform for Member States to 
submit questions that arise on a rolling basis.  

The  Commission  has  directly  supported  10  Member  States  in  preparing  their  social  climate  plans 
through the Technical Support Instrument. The support covered an initial assessment of ETS2 impacts 
and  vulnerable  groups,  stakeholder  engagement,  and  short-listing  and  characterisation  of  relevant 
measures and investments.  

In late 2024 and early 2025, the Member States launched mandatory stakeholder consultations on their 
social climate plans. The consultations will continue until the plans are officially submitted. In parallel, 
Commissioner Hoekstra chaired the first Implementation Dialogue on the implementation of ETS2 and 

8 Guidance on the implementation of the Social Climate Fund, DG Employment, Social Affairs and Inclusion, 9.10.2025. 

6 

 
 
 
the SCF in June 2025, convening a diverse group of stakeholders from sectors including heat pumps, 
automotive, building renovation, micromobility, fuel supply and civil society. 

By mid-October 2025, two Member States had officially submitted their Plans to the Commission for 
assessment (Latvia and Sweden). The Commission also reviewed the draft SCPs of some 15 countries. 
The  Commission  is  working  closely  with  all  Member  States  throughout  the  (pre-)submission  and 
assessment process, strongly encouraging Member States to swiftly implement the SCF and roll out 
support for vulnerable groups.  

The Commission has five months to assess the plans that have been formally submitted. It may provide 
observations or request additional information from the Member State concerned within two months of 
receiving them.  

3.  Cap on emissions 

The EU ETS cap 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 gives companies in the ETS 
certainty about the expected scarcity of supply of allowances.  

The cap is currently set to bring down EU ETS emissions by 62% by 2030, compared to 2005. From 
2024 to 2027, the cap decreases annually at the rate of 4.3% of the reference emissions in Articles 3c 
and 9 of the ETS Directive9. From 2028, the annual reduction rate will be 4.4% per year.  

Separate  cap  calculations  apply  to  emissions  in  the  scope  of  the  EU  ETS  from  electricity  and  heat 
generation, industrial production and  maritime transport (as per Article 9 of the ETS Directive)  and 
from aviation (as per Article 3c of the ETS Directive).  

• 

• 

In 2024, 1 386 051 745 allowances were issued for electricity and heat generation, industrial 
production and maritime transport10, while 27 563 529 allowances were issued for aviation11.  

In 2025, 1 298 127 514 allowances were issued for electricity and heat generation, industrial 
production and maritime transport, while 26 233 302 allowances were issued for aviation.  

Under Article 9 of the ETS Directive, the 2026 cap is to be reduced by 27 million allowances (in line 
with the overarching 2030 emissions reduction target for the EU ETS).  

At the same time, the cap is to be increased to reflect the expansion of the scope of the EU ETS to 
emissions of N2O and CH4 from maritime transport.  

9 In 2024 and 2025, the linear reduction factor for electricity and heat generation, industrial production and maritime transport 
amounted to 87 924 231 allowances and for aviation 1 330 226 allowances. 

10 For more details, see Commission Decision (EU) 2023/1575 of 27 July 2023, OJ L 192, 31.7.2023, p.30.  

11 For more details, see Commission Decision (EU) 2024/1797 of 27 June 2024 amending Decision (EU) 2023/2440, OJ L, 
2024/1797, 28.6.2024. ELI: http://data.europa.eu/eli/dec/2024/1797/oj 

7 

 
 
 
Based on emissions for the most recent year for which data  are available12, this increase amounts to 
2 375 680 allowances. These additional allowances will be auctioned and add to the Innovation Fund, 
entirely supplied by the EU ETS (see Chapter 8.2).  

Furthermore, the list of installations excluded by certain Member States under Article 27 of the ETS 
Directive was updated for the period 2026-2030, resulting in small adjustments to the cap and the linear 
reduction factor as of 2026. 

Altogether  in  2026,  1 185 420 090  allowances  will  be  issued  for  electricity  and  heat  generation, 
industrial production and maritime transport, while 24 903 076 allowances will be issued for aviation13.  

Table 1 shows the total quantities of allowances issued for the different sectors under the EU ETS cap.  

Table  1. EU ETS cap  (2021-2026). 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. From 1 January 2024, the scope of the EU ETS for aviation 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  from  2024 
reflects the extended scope of the EU ETS for aviation. 

Year 

2021 

2022 

2023 

2024 

2025 

2026 

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 

1 298 127 514 

1 185 420 090 

28 306 545 

27 268 379 

26 341 779 

27 563 529 

26 233 302 

24 903 076 

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

12 Emissions data reported under Regulation (EU) 2015/757 for the reporting period 2024 on 1 October 2025. 

13 In 2026, the linear reduction factor for electricity and heat generation, industrial production and maritime transport amounted 
to 87 913 405 allowances and for aviation 1 330 226 allowances. 

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2005 
2.3 billion 

2008-12 average 
2.2 billion 

2013 
2.1 billion 

Cap reduction (2013-20) 
-1.74% per year 

Cap reduction 
(2021-23) 
-2.2% per year 

Cap reduction 
(2024-27) 
-4.3% per year 

Cap reduction 
(2028 -) 
-4.4% per year 

2020 
1.8 billion 
(-21% compared to 
2005) 

2030: 
-62% 
compared 
to 2005 

3,0

2,5

2,0

1,5

1,0

0,5

0,0

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

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.  From  2024,  verified  emissions  in  the  figure  also  include  the  maritime  sector,  hence  the  2024  and  2023  emissions  are  not 
comparable. 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).  

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4.  Auctioning of allowances 

Auctioning is the main method of distributing allowances in the EU ETS, accounting for up to 57% of 
the cap14. The Auctioning Regulation (Regulation 2023/2830)15 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 2024, 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 (2021-2024). 

Year 

2021 

2022 

2023 

2024  

General allowances 

Aviation allowances 

582 952 500 

482 389 000 

517 587 000 

592 801 500 

3 785 500 

3 698 000 

5 720 500 

6 688 500 

In total, 221 auctions were held in 2024. No auctions were cancelled. From January 2025, allowances 
issued for the aviation sector are general allowances and no longer a separate allowance category. 

Since July 2023, auction volumes have included allowances allocated to the Recovery and Resilience 
Facility  (RRF)  under  the  REPowerEU  Regulation  (Regulation  2023/435)16.  Allowances  auctioned 
under the REPowerEU Regulation will raise EUR 20 billion for the RRF by 31 August 2026. Member 
States will use these additional RRF resources to carry out further reforms and make investments to 

14  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. 

15  Commission  Delegated  Regulation 
ELI: http://data.europa.eu/eli/reg_del/2023/2830/oj 

(EU)  2023/2830  of  17  October,  OJ  L,  2023/2830,  20.12.2023. 

16 Regulation (EU) 2023/435 of 27 February 2023, OJ L 63, 28.2.2023. 

10 

 
 
 
advance the clean energy transformation and boost energy security. By 30 June 2025, EUR 11.5 billion 
was raised for the RRF - REPowerEU with 164 710 000 allowances auctioned. 

Figure 2 gives an overview of auction clearing prices in the EU carbon market in 2024 and the first half 
of 2025. The highest auction price in 2024 of EUR 75.35 was reached on 3 June. The lowest price of 
EUR 49.50  was  recorded  on  23  February.  The  average  price  in  2024  was  EUR 64.74,  down  from 
EUR 83.60 in 2023. Auction prices were fairly range bound in 2024, with 182 out of 221 (82%) values 
between EUR 60 and EUR 75. 

The  auction  platform  regularly  publishes  detailed  results  of  each  auction  on  its  website17.  Further 
information on the performance of auctions, including the participation, cover ratios and prices, can be 
found in the ETS countries’ auction reports18. 

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90

80

70

60

50

40

30

20

10

0

Figure 2. Clearing prices in auctions of general allowances (from 1 January 2024 to 30 June 2025) [EUR/tonne 
CO2] 

4.1. Auctioning and cancellation of allowances due to maritime scope expansion of the EU 

ETS 

Maritime transport is included in the EU ETS with an initial phase-in period for 2024 and 2025, when 
shipping companies are obliged to surrender allowances only for a portion of their emissions (40% and 
70% respectively). 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. Under Articles 3gb and 12(3-e) of the ETS Directive, the difference is 
to be cancelled from auctioning. The cancellation for 2024, totalling 54 243 768 allowances, will take 
place in 2026 through an amendment to the auction calendar. 

17 EU ETS auctions, EEX.  

18 Auction reports, DG Climate Action.  

11 

 
 
 
 
 
 
Article 9 of the ETS Directive provides that from January 2026, the quantity of allowances are to be 
increased  to  take  into  account  the  coverage  of  non-CO2  greenhouse  gas  emissions  from  maritime 
transport. The allowances resulting from that increase  are to be auctioned  in 2026 and added to the 
Innovation Fund through an amendment to the auction calendar. 

4.2. Effort Sharing Regulation flexibility 

The  Effort  Sharing  Regulation  (ESR)  establishes  binding  national  emission  reduction  targets  for 
Member States for the period 2021-2030. These targets cover sectors outside the existing EU ETS – 
domestic transport (excluding aviation), buildings, agriculture, waste and small industry.  

The  Regulation  includes  a  one-off  flexibility  provision  whereby  nine  Member  States19  have  the 
possibility to cancel up to a maximum of 100 million EU ETS allowances collectively for compliance 
with their target, to be deducted from their respective auction volumes.  

From  2021  to  2024,  six20  of  these  eight  Member  States  used  the  ‘ESR  flexibility’  and  collectively 
deducted 28.8 million allowances from their auction volumes. Going forward, Sweden will start using 
the ‘ESR flexibility’ from 2025, while Denmark and Luxembourg will stop using the flexibility from 
2026 onwards. 

4.3. Voluntary cancellation of allowances 

Under Article 12(4) of the ETS Directive, Member States are encouraged to cancel allowances if they 
close  electricity  generation  capacity  in their territory due  to additional  national measures.  This  way 
Member States may prevent the resulting decrease in emissions from being made up elsewhere in the 
system.  

The  Member  State  concerned  must  inform  the  Commission  of  its  intended  cancellation.  The 
cancellation is carried out by reducing the total quantity of allowances to be auctioned by the Member 
State and the quantity is limited to a maximum of the sum of relevant verified emissions over the five 
years preceding the closure. The procedure for the cancellation of allowances is laid down in Article 25 
of the Auctioning Regulation.  

In December 2023, Germany notified the Commission of its intention to cancel allowances associated 
with  the  closure  of  two  power  plants  in  2022  as  part  of  the  country’s  coal  phase  out  policy21.  The 
cancellations are planned to occur between 2025 and 2030. The number of allowances to be cancelled 
in relation to the notification may be communicated to the Commission annually.  

The  methodology 
to  be  cancelled  was  part  of  
the  number  of  allowances 
the notification. It takes into account emissions from replacement electricity generation in the electricity 
market as well as the operation of the Market Stability Reserve.  

to  calculate 

19  The  nine  Member  States  are:  Belgium,  Denmark,  Ireland,  Luxembourg,  Malta,  The  Netherlands, Austria,  Finland  and 
Sweden. The flexibility provision concerns Member States with targets under the Effort Sharing Regulation significantly above 
both the EU average and their cost-effective reduction potential, as well as Member States that did not allocate any free EU 
ETS allowances to industrial installations in 2013. 

20 The Netherlands and Sweden did not use the flexibility. 

21 Notification by Germany of voluntary cancellation for plants closed in 2022, DG Climate Action, 2.5.2024 

12 

 
 
 
In April 2025, Germany submitted to the Commission the number of allowances to be cancelled for the 
year 2023, from 1 September to 31 December 202522. Based on the notified methodology, the number 
of allowances to be cancelled would depend on the surplus indicator of the Market Stability Reserve 
under the EU ETS (the total number of allowances in circulation, TNAC) in 202423. 

The Commission published the 2024 TNAC on 28 May 2025 (see Chapter 6.1). It amounted to 1.15 
billion allowances. Consequently, 514 000 allowances were cancelled from Germany’s auction volume. 
This is already reflected in the revised 2025 auction calendars adopted on 28 July 2025.   

5.  Free allocation of allowances 

Free allocation is a transitional measure primarily addressed to industry sectors. 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 leakage24.  

A dedicated carbon leakage list identifies sectors  deemed to be at risk of carbon leakage, which are 
eligible to receive free allocation at 100% of the relevant benchmark levels. The list identifies 63 sectors 
and sub-sectors covering most of industrial emissions in the EU ETS. Less exposed sectors receive free 
allocation corresponding to a maximum 30% of the benchmark value. 

Free allocation is based on performance benchmarks, which reflect an average emissions intensity per 
unit of product of the 10% most efficient installations in each sector. As allowances must be surrendered 
for  all  emissions,  allowances  must be  bought on the market for  emissions  beyond  those  benchmark 
values.  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  2021-2025  allocation period25.  The 
benchmarks will be updated for the 2026-2030 allocation period, a process that is ongoing at the time 
of writing. According to the revised ETS Directive, the annual reduction rates of the benchmarks have 
been 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 as of 2026. The applicable annual 
reduction rate will be determined specifically for each benchmark.  

Since  2021,  volumes  of  free  allocation  are  being  adjusted  when  significant  changes  in  industrial 
production volumes occur based on a comparison between the initial volumes and an average of the 
preceding two years26. The threshold for adjustments is set at 15% increasing or decreasing production, 
and subsequent adjustments may take place between smaller 5% intervals. 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 

22 Notification by Germany of voluntary cancellation of allowances in the EU ETS for plants closed in 2023, DG Climate 
Action, 5.5.2024 

23 If the 2024 TNAC was above 1 096 million, 514 000 allowances would be cancelled. If the 2024 TNAC was between 833 
million and 1 096 million, no allowances would be cancelled. 

24  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. 

25 Commission Implementing Regulation (EU) 2021/447 of 12 March 2021, OJ L 87, 15.3.2021. 

26 Commission Implementing Regulation (EU) 2019/1842 of 31 October 2019, OJ L 282, 4.11.2019. 

13 

 
 
 
submitted in 2021-2024 was over 3 900, around three times as many as the yearly average up to 2020. 
There  is  an  increase  in  numbers  from  year  to  year  due  to  the  smaller  5%  intervals  required  for 
subsequent changes to free allocation. 

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 70/tCO2, the value of this allocation would amount 
to  about  EUR 39 billion  per  year  during  this  period.  By  mid-2025,  the  Commission  had  adopted 
16 decisions to adjust free allocation due to changes in industrial production volumes, resulting in a net 
reduction  of  173.7 million  allowances27.  In  parallel,  however,  the  Commission  also  adopted  seven 
decisions  correcting  the  initial  level  of  free  allocation,  adding  2.3 million  allowances28.  This  was 
necessary due to errors found in the data submitted by installations when applying for free allocation. 
Overall, the free allocation for 2021-2025 has been reduced by 171.5 million allowances 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 from phase 3 (2013-2020) and 200 million allowances from the Market Stability Reserve.  

Table 3 summarises the annual levels of free allocation in the 2021-2025 allocation period (both initial 
and adjusted levels), showing reductions of ‘Actual free allocation’ for the years 2024 and 2025. The 
main reasons for these reduced volumes are the negative impacts on production levels for certain sectors 
because of the pandemic and the energy crisis primarily in 2022 and 2023. Because adjustments to free 
allocation are based on a comparison considering the average production levels over two years, the full 
effect of a continued decrease in production is delayed by two years.   

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

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  

545.7 

542.4 

537.0 

499.7 

494.8 

2 619.6 

Adjusted and corrected 
free allocation  

-13.9 

-16.5 

-21.2 

-57.8 

-62.0 

-171.5 

Since  2013,  the  EU  ETS  has  been  built  on  the  concept  of  an  EU-wide,  harmonised  approach  for  a 
transitional system of free allocation of allowances based on benchmarks. This design, and the use of 
benchmarks, allows for situations where the free allocation received by individual installations can and 
is  permitted to  exceed  the verified emissions for  one or  more  years.  However,  the  surplus of  a few 
installations does not prevent overall emissions from decreasing and most installations would have a 

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

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

14 

 
 
 
carbon cost for obtaining the required amount of additional allowances to cover their emissions. The 
main reasons why a surplus of allowances could be received by an installation for free are explained 
below. 

The benchmark values are set and regularly updated based on the average performance of the 10% most 
efficient  (least  emission  intense)  installations  using  that  benchmark.  This  means  that  under  each 
benchmark there would be a number of installations outperforming the other 90% that would receive 
enough  allowances  to  cover  their  emissions  or  even  a  surplus  of  allowances.  In  addition,  the  Free 
Allocation Regulation includes provisions on the attribution of free allocation in the case of export and 
import of heat or waste gases, which may differ from how emissions are reported. Emissions and free 
allocation for such cases could be assigned to separate installations, with the result that one appears to 
receive more allowances than its emissions. For example, a chemical plant importing heat from another 
installation receives free allocation to mitigate carbon leakage risks while the emissions are reported by 
the heat producing plant.  

Also relevant for a potential excess of allowances are the rules  for annual  allocation adjustments to 
reflect significant changes in industrial production volumes (see above) The two-year average creates 
a ‘buffer’, meaning that the full effect of a significant production decrease would not apply in full on 
free allocation levels until two years later, i.e. reported emissions would go down immediately but free 
allocation would not. 

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 from phasing out ETS free 
allocation 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  accounted  for 
approximately 54% of total free allocation in 2021-2025.  

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 began in October 2023, during which importers report emissions but are not yet 
required to make payments. It continues until the end of 2025, when full implementation will gradually 
be phased in. 

Importers of goods in CBAM sectors to the EU will need to buy and surrender certificates covering 
embedded emissions from 2026. To support industry in its decarbonisation efforts, the ETS Directive 

29 Regulation (EU) 2023/956 of 10 May 2023, OJ L 130, 16.5.2023.  

15 

 
 
 
directs proceeds from the auctioning of phased-out free allowances to the Innovation Fund (see Chapter 
8.2), paying particular attention to projects in CBAM sectors. 

The EU is also taking steps to simplify and strengthen CBAM for its definitive phase. In June 2025, the 
European Parliament and Council reached a provision political agreement on a proposal to simplify 
CBAM. This was adopted formally in September 202530. One key aspect of the proposal is to increase 
the exemption threshold to allow up to 50 tonnes of imported goods per importer per year to be exempt 
from CBAM. This is expected to exempt 90% of companies while still covering 99% of emissions. At 
the time of writing, the Commission is also preparing several pieces of secondary legislation (delegated 
acts  and  implementing  acts)  to  ensure  timely  and  effective  implementation  of  CBAM  when  the 
definitive phase begins in 2026. 

The Commission is also preparing legislative proposals to extend the CBAM to certain downstream 
goods to prevent downstream carbon leakage31 as well as to address the risk of circumvention32 and to 
adjust the rules applicable to electricity imports.  

At the same time, the Commission will publish a proposal to address the risk of carbon leakage related 
to exports of CBAM goods produced in the EU, as announced in the Communication on Delivering the 
Clean  Industrial  Deal.33  As  discussed  in  last  year’s  Carbon  Market  Report,  the  phase-out  of  free 
allocation  means  that  EU  producers  of  CBAM  goods  will  have  to  pay  for  their  embedded  carbon 
emissions, while carbon leakage is addressed by CBAM placing an equivalent carbon price on imported 
goods.  

The Commission is also preparing a comprehensive review of CBAM for publication before the end of 
2025, as provided in the CBAM Regulation. This review will assess the possibility of extending the 
scope of CBAM, the criteria used to identify CBAM goods, and the methodology for calculating indirect 
emissions.  It  will  also  assess  the  governance  system,  administrative  costs,  progress  made  in 
international  climate  action  discussions,  and  the  impact  of  CBAM  on  imports  from  developing 
countries, in particular least developed countries. 

6.  EU carbon market  

6.1. Balancing supply and demand 

The  Market  Stability  Reserve  (MSR)  fosters  carbon  market  balance  and  resilience  by  adjusting  the 
supply of allowances to be auctioned in the EU ETS year on year. It is a rule-based instrument first 
introduced to address the structural imbalance between the supply of and demand for allowances on 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. In the short term, the MSR reacts to sudden supply-demand 
shocks, for example due to the economic downturn caused by the COVID-19 pandemic in 2020.  

30 Commission welcomes political agreement to simplify and strengthen the carbon border adjustment mechanism, DG Climate 
Action, 18.6.2025. 

31 Where carbon costs for basic CBAM materials may prompt manufacturers of downstream goods to move production abroad 
outside of the scope of the EU ETS.  

32 The CBAM Regulation defines circumvention as practices for which there is insufficient cause or economic justification, 
other than to effectively avoid, wholly or partially, the financial liabilities arising from CBAM. 

33 See COM (2025) 378 final, Delivering on the Clean Industrial Deal’, 2.7.2025, p.4.  

16 

 
 
 
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 the publication and according to a specific key. On 
28 May 2025, the Commission published the Communication on the TNAC for 202434.  

The 2024 TNAC totalled 1.15 billion allowances  – a slight increase compared to 2023. As a result, 
276 million allowances (24% of the TNAC) are being withdrawn from auctions  between September 
2025 and August 2026.  

At  the  start  of  each  year,  the  MSR  invalidates  allowances  in  its  holdings  above  a  threshold  of  400 
million. On 1 January 2025, the MSR invalidated 271 million allowances, leaving 400 million in the 
Reserve. Since 2023, the MSR has invalidated a total of 3.2 billion allowances.  

Figure 3 illustrates the trend in the surplus of allowances in the EU carbon market since 2013. National 
contributions to the MSR are presented in Section 2 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

1,15

2,5

2,0

1,5

1,0

0,5

0,0

]
s
n
o
i
l
l
i
b
[

s
e
c
n
a
w
o
l
l

A

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Figure 3. Surplus of allowances in the EU ETS (2013-2024). 

6.2. 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 

34 Market Stability Reserve under the EU Emissions Trading System to reduce auction volume by 276 million allowances 
between September 2025 and August 2026, DG CLIMA, News article, 28.5.2025. Official journal of the EU: Communication 
from the Commission - Publication of the total number of allowances in circulation in 2024 for the purposes of the Market 
Stability Reserve under the EU Emissions Trading System (OJ C, C/2025/3180, 4.6.2024).  

17 

 
 
 
 
 
under  MIFID  II  –  the  Directive  on  markets  in  financial  instruments  (Directive  2014/65/EU)35.  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 States36, 
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, other financial markets rules apply to the trading of emission allowances such 
as rules preventing  market abuse  and insider dealing (Regulation 596/2014)37 which 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.  

Following the 2023 revision of the ETS Directive, several amendments were implemented to further 
improve the transparency of the EU carbon market. ESMA was tasked with monitoring and regularly 
assessing the functioning of the EU ETS covering the primary market of auctions and trading on the 
secondary markets. In its first annual Report on the monitoring of EU carbon markets, published on 
7 October 202438, and based on 2023 data, ESMA found no significant issues in the functioning of the 
market. ESMA identified decarbonisation of the power sector and industrial activity as key drivers for 
price developments in EU carbon markets.   

In  its  most  recent  report39,  published  on  22  October  2025  and  based  on  2024  market  data,  ESMA 
reconfirmed  that  carbon  markets  evolved  in  line  with  market  expectations.  The  analysis  reaffirms 
patterns and trends highlighted in the earlier report. The 2025 report demonstrates an initial gradual 
decline of ETS prices in 2024, followed by stabilisation driven by weak demand from the power sector, 
which  continued  to  decarbonise,  and  by  higher  auction  volumes.  ESMA  also  reconfirmed  the 
persistence  of  relative  concentration  of  auctions,  which  is  attributed  to  the  operators’  preference  to 
source allowances via financial intermediaries.  

ESMA observed that trading activity increased by 35% in 2024, reaching a total of 13.7 billion tonnes 
of CO2eq exchanged across 4.7 million transactions. Market growth was primarily driven by on-venue 
trading, while off-exchange (over the counter) trading activity remained stable. Investment firms and 
credit institutions continue to play an important role both on- and off-exchange markets, accounting for 
63% of total trading volumes. 

ESMA outlined that central to the derivatives markets are futures contracts, which accounted for three-
quarters of volumes traded in 2024. Overall, the secondary market contributes to the good function of 
the EU ETS by facilitating the acquisition of emission allowances by compliance entities from financial 
intermediaries.  

ESMA also reiterated the importance of making legal entity identifiers (LEIs) available for entities in 
the  Union  Registry  and  calls  for  additional  effort  by  national  administrators  to  ensure  the 
implementation of the LEI registration requirement for account holders in the Union Registry. This will 

35 Directive 2014/65/EU of 15 May 2014, OJ L 173, 12.6.2014. See consolidated version.  

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

37 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.  

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

39 ESMA Market Report on EU Carbon Markets - 2025 (ESMA50-481369926-30552, 22.10.2025) 

18 

 
 
 
remain particularly relevant in 2025, as the number of account holders continues to increase due to the 
expansion of the EU ETS to the maritime sector and the launch of the ETS2 for building, road transport 
and  other  sectors.  ESMA  considers  that  further  analysis  and  monitoring  of  the  carbon  market  is 
warranted in this respect.  

this 

to  report 

While it is not mandatory to have an LEI to open an account in the Union Registry, entities that have 
an  LEI  are  required 
the  Union  Registry  when  opening  
information 
an  account.  In  addition,  the  2023  amendment  of  the  Registry  Regulation  (Regulation  2019/1122)40 
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. Despite the obligation to review information on availability of LEIs, the 
availability of LEIs remains below expectations.  

in 

On 28 March 2024, the revised MIFID II41, MIFIR – Regulation on markets in financial instruments 
(Regulation  2024/791)42  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 reports twice weekly43, improving the transparency in 
trading in emission allowances and derivatives thereof.  

As  a  follow-up  to  these  new  rules,  the  Commission  is  reviewing  the  regulatory  framework  for 
commodity derivatives markets, including emission allowances. The Commission is assessing whether 
position  limits  and  management  controls  could  contribute  to  preventing  market  abuse  and  promote 
orderly pricing and settlement conditions. Furthermore, the Commission is evaluating the criteria for 
defining ancillary activities at group level and exploring the possibility of centralizing and harmonizing 
transaction  data  collection  across  MIFIR  and  EMIR  -  European  Market  Infrastructure  Regulation 
(Regulation 648/2012)44, and assessing which data should be public and how best to disseminate it. As 
part of this work, the Commission conducted a targeted consultation45 on the review of the functioning 
of commodity derivatives markets and certain aspects relating to spot energy markets, which also cover 
financial market rules applicable to emission allowances.  

The findings of the targeted consultation on the commodity derivatives framework will feed into the 
work of the Gas Market Task Force (GMTF), set up in early 2025 as part of the action plan for affordable 
energy46, to scrutinise the operation of EU gas markets and intervene when necessary and appropriated. 

40  Commission  Delegated  Regulation  (EU) 2019/1122  of 12 March  2019  supplementing  Directive  2003/87/EC,  OJ  L  177, 
2.7.2019. See consolidated version. 

41  Directive  (EU)  2024/790  of  28 February  2024  amending  Directive  2014/65/EU,  OJ  L,  2024/790,  8.3.2024,  ELI: 
http://data.europa.eu/eli/dir/2024/790/oj . See consolidated version.  

42  Regulation  (EU)  2024/791  of  28 February  2024  amending  Regulation  (EU)  No  600/2014,  OJ  L,  2024/791,  8.3.2024, 
ELI: http://data.europa.eu/eli/reg/2024/791/oj. See consolidated version.  

43 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. 

44 Regulation (EU) No 648/2012 of 4 July 2012, OJ L 201, 27.7.2012. See consolidated version.  

45 Targeted Consultation Document - Review of the functioning of commodity derivatives markets and certain aspects 
relating to spot energy markets. 26.02.2025  

46 Action Plan for Affordable Energy Unlocking the true value of our Energy Union to secure affordable, efficient and clean 
energy for all Europeans, published 26 February 2025. 

19 

 
 
 
Given  that  the  rules  on  energy  derivative  products  broadly  also  apply  to  the  trading  of  emissions 
allowances  and  associated  derivative  products,  any  findings  of  the  task  force,  which  is  expected  to 
finalise its work by the end of 2025, could be relevant for EU carbon markets.  

7.  Emission trends 

In 2024, overall emissions in the EU ETS amounted to 1 187 million tonnes (Mt) 47. This figure is higher 
than in 2023 (1 150.3 Mt CO2eq) partly due to the inclusion of the maritime sector in the EU ETS. 
Considering only installations and aircraft operators, ETS emissions in 2024 were 4.4% below 2023 
level.  

Emissions from power and industry installations amounted to 1 033.3 Mt CO2eq, representing a 5.8% 
decrease from 2023 levels. With this progress, ETS emissions from these installations are now around 
50% below 2005 levels and on track to achieve the 2030 target of 62% reduction. Table 4 shows annual 
emissions data from installations. Aviation and maritime emissions are discussed in Chapters 9 and 10 
respectively. 

The primary contributors to the overall reduction in EU ETS emissions were the heat and power sectors. 
Emissions from electricity and heat generation dropped by 10.7% compared to 202348, largely due to a 
substantial increase in the share of renewables and nuclear in the electricity mix, coupled with a reduced 
reliance of major fossil fuels such as natural gas and coal (see Chapter 7.1). This trend emerged despite 
lower average carbon prices in 2024 (mostly within the EUR 60-75 range), and an overall increase in 
electricity production. 

In 2024, renewables and biofuels were the leading source of electricity in the EU, capturing 47.2% of 
the share. Overall renewable electricity output increased by 7.6% in 2024, with solar power seeing a 
remarkable increase of 19.3% and hydropower growing 12%, although biofuel use declined by 5.2%49. 

Nuclear  energy  and  fossil  fuel  combustion  contributed  23.5%  and  28.1%  to  electricity  production, 
respectively. This includes an 11.9% decline in coal-based electricity, 8.1% drop in natural gas usage, 
a 5.2% rise in oil-based electricity, and a 5.1% increase in nuclear energy production.  

In 2024, the EU experienced another record year for solar energy capacity installations, with 65.5 GW 
added, bringing the total to 338 GW, as reported by SolarPower Europe. Wind energy capacity reached 
234 GW, with 12.9 GW being installed in the same year, according to WindEurope. 

Emissions from industrial installations in 2024 decreased slightly, by 0.8% compared to 2023. Despite 
the  overall  reduction  of  output  in  industrial  production50,  a  modest  recovery  was  observed  in  some 
energy-intensive sectors  such  as  steel,  fertilisers  and chemicals.  This  suggests that these  sectors  are 
gradually ramping up activity after the energy crisis triggered by the surge in natural gas prices in 2022 
due to Russia’s invasion of Ukraine. The varying production output in different sectors can justify the 

47 Verified ETS emissions in 2024, Union Registry, data extracted on 1 October 2025. 

48 2% of this decrease is also justified by data inconsistencies affecting the split between the power and the industrial emissions, 
not by market trends. 

49 Net electricity generation by type of fuel - monthly data, Eurostat. 

50 Industrial production down by 1.1% in the euro area and by 0.8% in the EU, Eurostat, 13.2.2025. 

20 

 
 
 
overall flat trend in emissions, even if small energy efficiency  improvements were also observed in 
certain sectors in 2024. 

Table 4. Verified emissions from installations in the EU ETS (2019-2024) [million tonnes CO2eq]. Data extracted 
from the Union Registry on 1 October 2025.  

Year 

Verified emissions- 
installations 

2019 

1 530 

2020 

1 356 

(1 253 UK 
excl.) 

2021 

2022 

2023 

2024 

1 337 

1 313 

1 096 

1 033 

Change year-on-year 

-9.1% 

-11.4% 

Verified emissions- 
electricity and heat 
generation 

822 

696 

(653 UK excl.) 

Change year-on-year 

-14.7% 

-15.3% 

-1.4% 

(6.6% UK 
excl.) 

-1.8% 

-16.5% 

-5.7% 

708 

725 

552 

493 

1.6% 

(8.5% UK 
excl.) 

2.4% 

-23.9% 

-10.7% 

Verified emissions- 
industrial production 

708 

660 

(601 UK excl.) 

629 

589 

544 

540 

Change year-on-year 

-1.6% 

-6.9% 

-4.7% 

(4.7% UK 
excl.) 

-6.4% 

-7.5% 

-0.8% 

7.1. Emissions from fossil fuel combustion in installations 

Figures 4 and 5 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, respectively51. Not all emissions 
under the ETS originate from the combustion of fossil fuels. Some emissions originate directly from 
industrial processes. Figure 4 shows the share of emissions from fossil fuel combustion in installations’ 
total emissions, and Figure 5 shows the breakdown of combustion emissions by fuel type.  

Altogether, emissions are on a downward trend driven by the decarbonisation of the power sector – the 
deployment of renewables, coal being replaced by natural gas and an increasing use of biomass52. As 
shown in Figure 5, 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 reversed to 2024 having the lowest share 
of hard coal since 2013.  

51 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).  

52 Zero-rated emissions from sustainable biomass account for 22% on top of ETS installations’ emissions in 2024.  

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%

82%

82%

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Figure 4. Trend in total emissions from fossil fuel combustion in installations covered by the EU ETS (2013-
2024). 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% 6,5% 8,1%

21,1% 18,0%

80%

3,6%
5,8%

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

60%

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

40%

20%

0%

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

24,7% 24,2% 24,9% 24,1% 21,3% 20,6% 17,0% 15,6% 17,3% 19,8% 16,9% 13,8%

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

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 5 . Trend in the share of emissions from the combustion of different fuels in installations covered by the EU 
ETS (2013-2024). 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 substantial revenues for Member States to support 
climate  action  and  energy  transformation.  In  2024,  the  total  auction  revenue  amounted  to 
EUR 38.8 billion.  

•  EUR 24.4 billion  went  directly  to  the  Member  States  and  EUR 0.3 billion  went  to  Iceland, 

Liechtenstein, Norway and Northern Ireland.  

22 

 
 
 
 
 
 
•  EUR 6.3 billion  supplied  the  ETS  Modernisation  Fund,  EUR  2.3  billion  supplied  the  ETS 
Innovation  Fund  and  the  remaining  EUR 5.6  billion  supplied  the  Resilience  and  Recovery 
Facility to fund the REPowerEU Plan, which Member States use to advance the clean energy 
transition and boost energy security – by implementing the reforms and investments included 
in the REPowerEU chapters of their resilience and recovery plans. 

Figure 6 shows the distribution of 2024 auction revenue. Detailed revenue data per country and per fund 
is included in Section 3 of the accompanying staff working document.  

Resilience and 
Recovery Facility

Modernisation Fund

Innovation Fund

Iceland. Liechtenstein, 
Norway and Northern 
Ireland

Member States

Figure  6.  Distribution  of  2024  ETS  auction  revenue  between  the  national  budgets,  the  Innovation  and 
Modernisation Funds and the Resilience and Recovery Facility. 

Under  Article 10(3)  of  the  ETS  Directive,  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 closely monitors 
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)53 on how they use their ETS revenue. These reports are based on templates and submitted 
via Reportnet 3 managed by the European Environment Agency54. They are publicly available on the 
agency’s website. 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 in any gaps.  

Of  the  EUR 24.4 billion that  Member  States  collected  in  ETS revenue  in 2024,  EUR 21.2  billion is 
subject to the obligation under Article 10(3)55. This is because  EUR 3.2 billion of the 2024 revenue 
(13%) was reported to have financed aid for electricity-intensive industries for indirect carbon costs. 
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 2024 revenue to be 
used for Article 10(3) purposes, 77% was already disbursed in 2024 and another 3% was committed to 
specific actions. Future reports will describe how Member States have used the remainder.  

From the EUR 21.2 billion, Member States reported56 having already disbursed EUR 16.4 billion and 
committed a further EUR 0.5 billion to Article 10(3) purposes. This leaves some EUR 4.3 billion still 
to be allocated, disbursed and reported.  

Table 5 includes a split of the EUR 24.4 billion collected by Member States in ETS revenue in 2024.  

Table 5. Split of the EUR 24.4 billion in ETS revenue collected by Member States in 2024. 

Revenue  
(EUR billion) 

Revenue reported as used to finance aid for indirect carbon costs 

Revenue subject to the Article 10(3) obligation and disbursed in 2024 

Revenue collected by Member States in 2024, subject to the Article 10(3) 
obligation and committed 

Revenue collected by Member States in 2024, still to be allocated, disbursed  
and reported 

3.2 

16.4 

0.5 

4.3 

Of  the  EUR 16.4 billion  in  revenue  reported  as  generated  and  disbursed  in  2024  on  Article 10(3) 
purposes, EUR 3.2 billion was used for projects in the ‘Energy supply - renewables, grids and storage’, 
EUR 3.3  billion  for  ‘Energy  efficiency,  heating  and  cooling  in  buildings’  and  EUR 3.6 billion  for 
‘Public  transport  and  mobility’.  Examples  include  grants  for  offshore  wind  and  biogas  upgrades  in 

53 Regulation (EU) 2018/1999 of 11 December 2018, OJ L 328, 21.12.2018.  

54 Use of ETS auctioning revenues - Reporting year 2025 – GovReg, Reportnet3, European Environment Agency 

55 Up to 4 June 2023, Member States were encouraged to use at least 50% of the revenue collected 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.  

56  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 

 
 
 
Denmark, deep retrofit projects with at least 40% reduction in heat consumption in residential buildings 
in Lithuania and investments in rail transport and cycle paths in Slovenia. 

In  addition,  Member  States  reported  having  used  EUR 0.8 billion  for  projects  in  ‘Industry 
decarbonisation (low-carbon technologies, CCUS and energy efficiency in industrial sector excl. energy 
sector)’, including funding for hydrogen projects to decarbonise industry in Germany.  

Member States also reported having used EUR 1.4 billion for measures and projects in ‘Social support 
and just transition’, including the Greek ‘Green Fund’ that funds actions for the development of regions 
transitioning  their  economies  away  from  fossil  fuels  as  well  as  projects  for  the  protection  and 
management of forests.  

Member States further reported having used EUR 0.5 billion for measures in ‘Road transport (cars, 
trucks)’,  including  financial  support  for  the  purchase  of  electric  and/or  hybrid  vehicles  in  Sweden, 
Latvia, Romania and Malta. 

For EUR 2.8 billion in 2024 disbursements, Member States reported actions, which either did not fit 
any  category  in  the  templates  or  fitted  multiple  categories  (in  these  cases,  Member  States  reported 
‘Other’ for the category). Examples include the biodiversity fund in Spain that enables ecosystems to 
be  restored,  renewable  energy  to  be  deployed  in  rural  areas,  and  sustainable land-use  practices  that 
jointly increase biodiversity and achieve measurable emission reductions at the landscape level to be 
upscaled.  

Figure 7 summarises Member States’ use of ETS revenues in the different categories.  

Combined categories 
under EUR 500 
million
4%

Other
17%

Road transport 
3%

Public transport and 
mobility 
22%

Social support and 
just transition
9%

Energy supply, grids 
and storage 
20%

Energy efficiency, 
heating and cooling in 
buildings
20%

Industry 
decarbonisation 
5%

Figure  7.  Split  per  category  of  the  EUR 16.4 billion  of  the  2024  ETS  auction  revenue  reported  as  disbursed. 
Combined categories under EUR 500 million include (in EUR million): adaptation (105), international purposes 
and  international  climate  finance  (94),  LULUCF,  agriculture  and  land-based  removals  (349),  administrative 
expenses (50), waste management (28), maritime transport (29), aviation (14), permanent removals (3). 

The EU ETS auction revenue has made an essential contribution to these and many other impactful 
climate action and energy transformation projects in the Member States. These projects have not only 

25 

 
 
 
 
helped reduce emissions but also ensure that the green transition is just. Importantly, Member States 
must make an effort to ensure the visibility of the source of funding for the actions or projects funded 
from  ETS  revenue  to  show  the  EU  ETS’  contribution  to  progressive  decarbonisation  and  the  just 
transition. For most actions reported for 2024 it is unclear whether the EU ETS is explicitly indicated 
and publicised as the funding source, something the Commission intends to follow-up.  

An overview of how each Member State used their ETS revenue is included in the 2025 Climate action 
progress report, in the accompanying staff working document57.  

8.1. Aid for indirect costs  

Under Article 10a(6) of the ETS Directive, Member States are encouraged to adopt financial measures 
in favour of sectors or subsectors at genuine risk of carbon leakage due to significant indirect carbon 
costs. This refers to the carbon cost passed on to electro-intensive industries through their electricity 
bills, as a result of energy companies purchasing ETS allowances.  

The  Commission  adopted  EU  ETS  State  aid  guidelines  to  harmonise  the  conditions  under  which 
Member States provide this aid and minimise competition distortions in the internal market58. These 
guidelines establish the sectors at genuine risk of carbon leakage due to indirect emission costs and 
stipulate that 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.  

Every  Member  State  that  provides  State  aid  to  compensate  indirect  emission  costs  has  notified  its 
scheme to the Commission for State aid assessment and received acknowledgement of the scheme’s 
compatibility with the internal market. Member States providing such compensation are required to 
publish  the  total  amount  of  compensation  paid,  including  a  breakdown  per  beneficiary  sector  or 
subsector. 

In 2024, 15 Member States provided aid for indirect costs incurred in 2023. This is the same as last 
year. However, the composition has changed following the expiry of a temporary support scheme in 
Austria and the re-introduction of payments by the Netherlands.  

Table  6  summarises  the  payments  made  by  Member  States  and  compares  them  to  2023  auction 
revenues. The total indirect cost payments in 2024 amounted to around EUR 5.52 billion. This is an 
increase of 40% compared to the EUR 3.95 billion disbursed in 2023, while the number of installations 
receiving aid was largely unchanged at around 1 850.  

Table 6. Aid amounts paid out in 2024 from the ETS auction revenue for indirect costs incurred in 2023. 

Member State 

Belgium 

Czechia 

Finland 

Amount paid   
 for indirect costs   
 incurred in 2023   
 [million EUR] 

Number   
 of recipients  
 (installations) 

Auction   
 revenues   
 in 2023[3]   
 [million EUR] 

Relative size of 
indirect costs aid 
compared to 
auction revenue 

249.9 

60.4 

143.2 

56 

23 

55 

739.9 

771.3 

571.5 

33.8% 

7.8% 

25.1% 

57 Forthcoming 2025 Climate action progress report and the accompanying staff working document 

58 Guidelines on certain State aid measures in the context of the system for greenhouse gas emission allowance trading post-
2021 (2020/C 317/04). A technical update of these guidelines is being prepared.  

26 

 
 
 
France 

Germany 

Greece 

Italy 

Luxembourg 

Netherlands 

Poland 

Portugal 

Romania 

Slovakia 

Slovenia 

Spain 

908.8 

2,395.0 

287.0 

165.5 

37.6 

147.3 

614.6 

25.0 

116.7 

58.3 

25.4 

282.8 

293 

707 

57 

252 

4 

48  

97 

23 

31 

9 

16 

191 

2,060.1 

7,582.5 

1,441.8 

3,547.4 

7.6 

1,261.1 

5,406.7 

726.7 

571.8 

377.5 

186.5 

3,514.0 

44.1% 

31.6% 

19.9% 

4.7% 

492.0% 

11.7% 

11.4% 

3.4% 

20.4% 

15.4% 

13.6% 

8.0% 

The increase in total aid is primarily due to higher allowance prices. Aid in a given year is based on the 
forward price of allowances in the previous year. Therefore, aid disbursed in 2024 for the costs incurred 
in 2023 was based on the average forward price in 2022. This price was EUR 83.59, which is an increase 
of around 50% compared to the previous year59. Total aid payments do not automatically increase by 
the same proportion as the allowance price since Member States’ compensation schemes often have a 
maximum budget calculated for the whole application period (in most cases, 2021-2030).  

Aid  payments  for  indirect  cost  compensation  also  increased  in  2024  when  expressed  as  a  share  of 
national  auction  revenues.  The  amount  paid  was  equivalent  to  19%  of  the  2023  auction  revenue 
collected  by  the  participating  Member  States,  compared  to  16%  in  2022.  This  share  has  therefore 
increased, but more slowly than both the allowance price and absolute amount of compensation paid. 
This is mainly so because i) the effect of higher allowance prices is partly counteracted by the decrease 
in the absolute volume of auctioned allowances; and ii) the total compensation may be limited by the 
budgets allocated to each national scheme.  

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  level,  but  five  Member  States  spent  more.  Justifications  provided  by  these 
Member States are summarised below.  

Aid payments by Belgium, France and Luxembourg have exceeded this threshold for most of the past 
five years. As in previous years, the high proportion of auction revenue paid in Belgium and France 
was attributed to the country’s high share of low-carbon electricity generation, leading to relatively low 
auction revenues compared to their share of electro-intensive industries.  

59 According to the State aid guidelines Member States’ compensation must be based on the average of one-year forward prices 
as observed in a given EU carbon exchange. The price used can vary slightly between each Member State depending on the 
EU carbon exchange used. 

27 

 
 
 
In the case of Luxembourg, expenditure continued to far outweigh its total auction revenue. This is due 
in part to its use of ETS allowances to offset emissions in the sectors covered by the Effort Sharing 
Regulation60. This practice is referred to as ESR flexibility (see Chapter 4.2).  

In Finland and Germany, the share of revenue also increased to above 25%. In each case, authorities 
attributed this to the increase in allowance prices that are used as the basis for compensation. Historical 
analysis by the German emissions trading authority showed that the 25% threshold has been exceeded 
four times since 2013 and identified high allowances prices as the main driver in these instances61.  

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 industry, energy, and mobility and buildings, 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 total budget of EUR 40 billion available (based 
on a carbon price of EUR 75/tCO2), the Innovation Fund has launched 11 calls for proposals since 2020, 
including two for auctions under the European Hydrogen Bank.  

The Commission reports in more detail on the implementation of the Innovation Fund separately. The 
third progress report on implementation of the Innovation Fund is expected in Q4-202562. 

In  the  2023  round  of  calls,  which  closed  in  February  2024  (Auction)  and  April  2024  (Net  Zero 
Technologies),  83  projects  joined  the  Fund’s  portfolio  representing  EUR  4.9  billion  in  support  for 
decarbonisation  in  energy-intensive  industries,  hydrogen  production,  renewable  energy  generation, 
mobility sector (including maritime and aviation) and the manufacturing of key net zero technologies. 
The support is spread over 18 EU and EEA countries, including projects signed for the first time in 
Estonia and Slovakia. These projects are expected to abate 408 million tonnes of CO2e over their first 
10 years of operation.  

For the first time an auction for the production of renewable (RFNBO) hydrogen was held under the 
European Hydrogen Bank in 2023. Six projects were selected, with a support of EUR 694 million to 
produce  1.52  million  tonnes  of  renewable  hydrogen  over  their  first  10  years  of  operation.  This 
competitive bidding process ensured cost-effective support for green hydrogen supply to the agriculture, 
maritime and heavy-duty transport sectors, as well as for the production of e-methane and e-methanol. 
The ‘Auction-as-a-Service’ feature was used with Germany contributing EUR 350 million to a national 
funding window. 

In the grants call published in 2023, a manufacturing topic was held for the first time with 20 projects 
supported  with  EUR  1.0  billion  to  produce  key  technologies  in  the  net-zero  transition  such  as 
electrolysers, solar panels, batteries, heat pumps and wind turbines. Similarly, the pilot topic, which 

60 The ESR permits Luxembourg to cancel 0.4 million EUAs per year on average between 2021 and 2030, equivalent to EUR 
33.5m if auctioned at the market price considered in this chapter.  

61  Beihilfen  für  indirekte  CO2-Kosten  des  Emissionshandels  (Strompreiskompensation)  in  Deutschland  für  das  Jahr  2023 
(link). 

62 European Commission: Directorate-General for Climate Action, Innovation Fund progress report 2023 – Report from the 
Commission to the European Parliament and the Council on the implementation of the Innovation Fund in 2023, Publications 
Office of the European Union, 2025 (link). 

28 

 
 
 
focussed on highly innovative projects with deep decarbonisation potential, was held for the first time 
with 19 projects  were supported  with EUR 489 million across a range of sectors including  pumped 
hydro, thermal energy storage, maritime, tidal energy and more.  

The  remaining  projects  were  in  the  large-scale  topic  (23  projects  with  EUR  2.8  billion  in  support), 
medium-scale (14 projects with EUR 434 million) and small-scale (7 projects with EUR 30 million).  

By July 2025, the Fund’s portfolio included 194 ongoing projects which are planned to receive EUR 
11.3 billion in support63. These projects are located in 27 EU/EEA countries and are expected to achieve 
around 860 million in CO2e emissions savings over their first 10 years of operation. 

The incentive provided by the EU ETS carbon price is much higher 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 65 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 change64. 

At the end of 2024, the Commission launched three new calls with a total budget of EUR 4.6 billion: 

•  Net-zero technologies: The call for net-zero technologies had a budget of EUR 2.4 billion and 
received a total of 359 proposals from 28 countries when it closed in April 2025.  Together, 
these  projects  requested  EUR 21.7  billion  in  support,  over  nine  times  the  available  budget. 
Preliminary  results  show  that  the  call  covered  key  decarbonisation  areas  across  several 
categories:  energy-intensive  industries  (169  proposals),  industrial  carbon  management  (24), 
renewable  energy  (67),  and  energy  storage (43).  Introduced  in  2023,  the Mobility  category, 
which covers maritime, aviation and road transport, attracted 50 proposals, while the buildings 
sector received 6 proposals. Notably, there was strong interest from sectors such as chemicals, 
cement and lime, refineries, and hydrogen. The Commission will publish the results of this call 
in the second half of 2025.  

•  Batteries: For the first time, the Commission launched the support for manufacturing of electric 
vehicle battery cells. The call had a budget of EUR 1 billion and received 14 proposals from 
eight countries in April 2025. In July 2025, it was announced that six projects were selected for 
funding under this call from France (two), Germany (two), Sweden and Poland to be awarded 
combined  support  of  EUR  852  million.  These  projects  will  have  a  combined  battery 
manufacturing capacity of around 56 gigawatt-hours (GWh) of eV battery cells per year.  

•  Hydrogen  auction:  The  third  call  for  proposals  was  for  the  second  round  of  the  European 
Hydrogen Bank auction for the production of renewable hydrogen. The auction opened with 
total  budget  of  EUR  1.2  billion,  including  a  novel  dedicated  EUR  200  million  budget  for 
projects with off-takers from the maritime sector. The auction closed in February 2025 with 66 
bids from 11 countries. 15 projects in five different countries were selected for grant agreement 
preparation. The scheme also included  national envelopes under the ‘Auctions-as-a-Service’ 
scheme with Austria providing EUR 400 million, Spain EUR 280–400 million and Lithuania 
EUR 36 million. The 15 selected projects must present a completion guarantee before signing 

63 Innovation Fund portfolio dashboard 

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

29 

 
 
 
the grant agreement. Some of them may decide not to do so, withdrawing from the selection 
process  and  creating  opportunities  for  projects  from  the  reserve  list  to  be  invited  to  start 
preparing the grant agreement. The final list of awarded projects will be published by the end 
of 2025.    

In  order  to  increase  the  technical,  financial  and  operational  maturity  of  innovative  projects,  project 
development assistance (PDA) is administered through the European Investment Bank. In 2024, the 
EIB signed 23 PDA agreements and proceeded with their execution. Since the start of the programme, 
62 projects have signed a support agreement and were completed. The impact of PDA is increasingly 
visible, with nine projects that had previously been unsuccessful having secured a grant under the 2023 
Innovation Fund Call. PDA has also been expanded now to be open to project developers who have not 
yet applied to the Fund, with applications directly to the EIB65.  

Since 2023, all projects that meet the minimum thresholds for all award criteria in the regular grant calls 
(whether selected for the Innovation Fund or not) have received the STEP (Strategic Technologies for 
Europe  Platform)  Seal66.  The  Seal  is  the  EU  quality  label  awarded  to  high-quality  projects  that 
contribute  to  STEP  objectives  and  helps facilitate  access to funding  from  Member  States  or  private 
investors. 

8.3. ETS Modernisation Fund 

The Modernisation Fund is a solidarity programme financed by the EU ETS.  Initially supporting 10 
lower-income Member States67, from 2024, the fund supports three additional lower-income Member 
States68, 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  key69.  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.  

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. 

65 Innovation Fund - Project Development Assistance, EIB.  

66 Regulation (EU) 2024/795 of 29 February 2024, OJ L, 2024/795, 29.2.2024, ELI: http://data.europa.eu/eli/reg/2024/795/oj. 

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

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

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

30 

 
 
 
Since January 2021, around 200 schemes and individual projects have been confirmed for a total amount 
of EUR 19.1 billion, which has been disbursed to beneficiary Member States. These initiatives mostly 
relate to renewable energy, energy efficiency, energy storage and the modernisation of energy networks.  

In  June  2025, the  Commission adopted the  eighth  disbursement  decision70  under the  Modernisation 
Fund, the largest since 2021. On this basis, the EIB made payments for a total of EUR 3.7 billion to 
nine  beneficiary  Member  States71  to  finance  34  investment  proposals.  Projects  include  support 
development  of  clean  air  programme  supporting  energy  efficiency  improvements  and  heat  source 
replacements in single-family houses in Poland and increasing the electricity grid capacity in Latvia.  

Submissions for another round of proposals under the Modernisation Fund closed on 12 August 2025 
for non-priority projects and on 9 September 2025 for priority projects.  

As of 2025, investments must also comply with the ‘do no significant harm’ requirements under the 
Taxonomy Regulation (except for investments funded using the transferred allowances).  

8.4. ETS Decarbonisation Fund for Greece 

Article 10a(9) of the ETS Directive granted Greece the right, under certain conditions, to claim up to 
25 million  allowances  to  decarbonise  the  electricity  supply  of  its  islands72.  The  auctioning  of  these 
allowances will finance the Fund, which is estimated to be worth around EUR 2 billion. Greece, the 
European Commission and the EIB are working to operationalise this provision. In November 2024, 
the Executive Vice-President for the European Green Deal, Maroš Šefčovič, together with  Greece’s 
Minister of Environment and Energy, Theodoros Skylakakis, and EIB Vice-President, Ioannis Tsakiris, 
signed a trilateral agreement in Naxos, Greece, to set up the national ETS Decarbonisation Fund for the 
Greek islands73.  

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, 
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,  such  as  photovoltaic  systems,  offshore  windfarms  and  stand-alone 
storage systems, as well as initiatives to connect islands with the mainland’s electricity grid. The Fund 
will  also  contribute  to  climate  adaptation  measures  and  enhance  resilience  against  extreme  weather 
events.  

70 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 

71 The fifth disbursement decision under the Modernisation Fund authorised payments to Romania (EUR 1.1 billion), Czechia 
(EUR 65 million),  Lithuania 
(EUR 835 million),  Poland 
(EUR 59 million),  Croatia 
(EUR 27 million)  and  Estonia 
(EUR 24 million). 

(EUR 698 million),  Hungary 
(EUR 52 million),  Slovakia 

(EUR 77 million),  Bulgaria 

(EUR 35 million),  Latvia 

72 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). 

73 Executive Vice-President Šefčovič signs agreement between Greece, European Investment Bank and the Commission on a 
Decarbonisation Fund for Greek islands - European Commission.  

31 

 
 
 
 
9.  Aviation 

The EU ETS has regulated emissions from the aviation sector since 2012. Legally, the system covers 
all outgoing flights from to the EEA, and incoming flights if not exempted.  

In 2013, however, the EU limited ETS obligations for the aviation sector to flights within the EEA, to 
support  the  development  of  a  global  market-based  measure  to  reduce  aviation  emissions  by  the 
International Civil Aviation Organization (ICAO)74. The ETS Directive coverage limitation 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 ETS75. Flights to and from around 75 least developed countries 
and Small Island Developing States are exempted on an ongoing basis. 

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 
keeping a level 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 flights76 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 
202477. 

In  parallel, to  facilitate  progress  at  the  ICAO,  the limited,  intra-European  scope of  the  EU  ETS  for 
aviation  was extended  until  the  end  of 2026, as  all  major  non-EU  countries  should  be  applying  the 
Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) from 2027. As part of 
the mid-2026 ETS review, the Commission is required to assess whether non-EU states considered to 
be participating in CORSIA represent more or less than 70% of international aviation emissions, based 
on the most recent emission figures (ETS Directive Article 28b 3(b)). This approach aims to incentivise 
all  countries  which  should  participate  in  CORSIA  when  it  becomes  ‘mandatory’  to  implement  the 
scheme78. Overall, the EU encourages all countries to participate. 

The assessment mandated by the ETS Directive sets out clear parameters for the calculation of the 70% 
threshold. The numerator counts international aviation emissions represented by “states listed in the 
implementing  act  adopted  pursuant  to  Article  25a(3)”,  meaning  states  other  than  EEA  countries, 
Switzerland and the United Kingdom. The numerator therefore includes emissions from routes between 
the states listed in the implementing act, as well as routes between an EEA Member State or Switzerland 
or the United Kingdom and these states. The assessment follows the route-based principle, i.e. assuming 

74 Decision No 377/2013/EU of 24 April 2013 derogating temporarily from Directive 2003/87/EC, OJ L 113, 25.4.2013. 

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

76 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. 

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

78 Countries had the largest share of international aviation activity in 2018 measured in ‘revenue tonne kilometres’, meaning 
how  much  paying  cargo  or  passengers  an  airline  moved,  and  how  far.  These  34  States  are  listed  at  International-RTK-
rankings_2018_SIDS_LDC_LLDC.pdf. 

32 

 
 
 
that any flight on these routes is subject to CORSIA offsetting, even if it is operated by a carrier hailing 
from a non-participating state79. This prevents underestimation. The denominator of this calculation is 
all “international aviation emissions”, meaning all emissions on routes between two ICAO countries. 
Figures published80 by the ICAO Secretariat will be used for this calculation, which are either directly 
reported by countries, or else gap-filled by the ICAO Secretariat according to an agreed methodology. 
The calculation is as follows: 

𝐶𝑂2 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝑟𝑒𝑙𝑎𝑡𝑖𝑛𝑔 𝑡𝑜 𝑛𝑜𝑛 − 𝐸𝑢𝑟𝑜𝑝𝑒𝑎𝑛 𝑆𝑡𝑎𝑡𝑒𝑠 𝑜𝑛 𝑟𝑜𝑢𝑡𝑒𝑠 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑐𝑜𝑢𝑛𝑡𝑟𝑖𝑒𝑠 𝑝𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑛𝑔 𝑖𝑛 𝐶𝑂𝑅𝑆𝐼𝐴 𝑜𝑓𝑓𝑠𝑒𝑡𝑡𝑖𝑛𝑔
𝐶𝑂2 𝑒𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑠 𝑜𝑛 𝑖𝑛𝑡𝑒𝑟𝑛𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑟𝑜𝑢𝑡𝑒𝑠

In 2024, around 27.6 million aviation allowances were issued in line with the applicable scope of the 
EU  ETS.  Free  allocation  amounted  to  17.5 million  allowances.  Aircraft  operators  administered  by 
national administrators in the EEA received a little more than 0.3 million Swiss aviation allowances for 
free under the Swiss ETS. Approximately 6.7 million aviation allowances were auctioned in 2024.  

Emissions from aircraft operators continued to increase in 2024 compared to 2023. In 2024, emissions 
amounted  to  62.6 Mt  CO2eq  (including  1.1  Mt  of  operators  administered  by  Switzerland),  up  from 
54.3 Mt in 2023. This is partly due to the broadening of geographical scope for outermost regions. Table 
7 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 sector81 and to implement CORSIA for extra-European 
flights of EU-based airlines in EU law82. They are currently being implemented.  

To implement CORSIA in EU law, the Commission adopted in July 2025 the list of states considered 
to  be  applying  CORSIA  for  emissions  in  202583.  This  list  is  updated  annually.  In  July  2024,  the 
Commission  published  the  rules  for  calculating  offsetting  requirements  under  CORSIA84.  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  is  publishing  more  data  on  aviation 
emissions,  while  protecting  commercially  sensitive  data.  In  June  2025,  the  Commission  published 

79  CORSIA’s  route-based  approach  means  that  wherever  the  airline  is  based,  it  should  always  be  subject  to  offsetting 
requirement on routes between two participating states. The airline’s ‘home country’ is the only responsible for the airline’s 
CORSIA  compliance.  For  example: Airline A  from  country A  which  is  exempt  from  CORSIA  should  still  participate  in 
offsetting when it flies covered routes between participating countries B and C. Country A is meant to be responsible to ensure 
airline A’s compliance on these flights, for there to be a level-playing field. 

80 The ICAO Secretariat publishes this document on an annual basis, for 2024 it was published in October, entitled “Total 
Annual  CO2  Emissions  and  Information  for  Aeroplane  Operators”,  accessible  under  Part  III  of  this  website: 
https://www.icao.int/environmental-protection/CORSIA/Pages/CCR.aspx  

81 Directive (EU) 2023/958 of 10 May 2023 amending Directive 2003/87/EC, OJ L 130, 16.5.2023. 

82 Decision (EU) 2023/136 of 18 January 2023 amending Directive 2003/87/EC, OJ L 19, 20.1.2023. 

83  Commission 
ELI: http://data.europa.eu/eli/dec/2022/1500/oj. 

Implementing  Regulation 

(EU)  2025/1500  of  23 July  2025,  OJ  L,  2025/1500,  24.7.2025, 

84  Commission 
ELI: http://data.europa.eu/eli/reg_impl/2024/1879/oj. 

Implementing  Regulation 

(EU)  2024/1879  of  9 July  2024,  OJ  L,  2024/1879,  10.7.2024, 

33 

 
 
 
 
aggregated annual emissions data from aerodrome pairs within the EEA in 202385. This was a first step 
in publishing all data for 2023.  

Table 7. Aviation in the EU ETS (2019-2024) – verified emissions [million tonnes CO2eq], free allocation and 
allowances auctioned [million allowances]. Data extracted from the Union Registry on 1 October 2025. 

Year 

2019 

2020 

2021 

2022 

2023 

2024 

Verified emissions- 
aviation 

68.2 

25.2 

27.9 

49.5 

54.3 

62.6 

Change year-on- year86 

+1% 

−63% 

+30% 

+77% 

+9.7% 

+15.3% 

Free allocation (EU27 
+ Iceland, 
Liechtenstein,  
and Norway  
+ UK + Switzerland)87 

Allowances allocated 
for the support of SAF 
uplift (FEETS) 

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

Volumes of allowances 
auctioned  

31.388 

32.5 

24.0 

23.1 

22.5 

17.5 

/ 

/ 

/ 

/ 

/ 

1.3 

1.0 

0.8 

0.3 

0.25 

0.23 

/ 

5.5 

9.2 

3.8 

3.7 

5.7 

6.7 

The 2023 revision of the ETS Directive has advanced 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 2025, 50% fewer free allowances are allocated to aircraft operators.  

Aviation decarbonisation is urgently needed. The ETS carbon price already  provides an incentive of 
around EUR 200 per tonne  of sustainable aviation fuel used, compared to fossil kerosene. In 2025, the 
Commission implemented an additional support mechanism under the EU ETS for the use of sustainable 
aviation fuels. For each tonne of eligible fuel used on an ETS route airlines can claim support of around 

85 Publication of 2023 emissions data from aerodrome pairs - European Commission, DG Climate Action, 19.6.2025 

86 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. 

87 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. 

88 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. 

34 

 
 
 
 
EUR  500  up  to  EUR  7 000 89  per  tonne  of fuel.  This  incentive has  been  available  for  eligible fuels 
uplifted on ETS routes since 1 January 2024. For 2024, the incentive from EU ETS (as the operators 
are not required to surrender allowances) was worth around EUR 25 million. This was supplemented 
by ETS support of about 1.3 million allowances worth approximately EUR 100 million90. 

Recognising that non-CO2 aviation effects can no longer be ignored91, the EU is the first jurisdiction to 
introduce a monitoring, reporting and verification framework for these effects (see Chapter 11.1.2).  

10.  Maritime transport 

Maritime transport is a major emitter of greenhouse gases. Emissions from maritime transport activities 
are included in the EU ETS as part of the EU’s overall strategy to decarbonise shipping. From 1 January 
2024, the EU ETS scope includes emissions from maritime transport activities for 50% of emissions 
from voyages starting or ending outside of the EEA and 100% of emissions that occur between two 
EEA ports and when ships are within an EEA port.  

This extension of the EU ETS builds on the provisions in place for other sectors covered  by the EU 
ETS system as well as the Maritime Monitoring, Reporting and Verification (MRV) Regulation92. For 
2024 and 2025, the EU ETS maritime only covers CO2 emissions, but will to be extended to CH4 and 
N2O as of 2026. Shipping companies have reported 89.8 million tonnes CO₂ of verified emissions for 
202493. 

Shipping companies’  obligation to surrender allowances is introduced gradually, through a phase-in 
period lasting until 2026. During this period, shipping companies are required to surrender allowances 
in 2025, for 40% of the emissions reported in 2024, and in 2026 for 70% of emissions reported in 2025. 
A further reduction is made for ice-class vessels. 

Shipping companies were required to report their 2024 emissions by 31 March 2025 and surrender the 
corresponding number of emissions allowances by 30 September 2025.  

The  surrendering  requirements,  after  applying  of  deductions  and  the  phase-in  coefficient  for  2024, 
corresponded  to  35.6  million  EU  allowances.  To  bridge  the  gap  between  verified  emissions  and 
surrendered allowances from maritime transport, 54 243 768 allowances are being cancelled for 2024.  

89 This support system covers all or part of the remaining price difference between fossil kerosene and the eligible aviation 
fuels used by individual commercial aircraft operators on their flights covered by effective carbon  pricing through the EU 
ETS, encouraging these aircraft operators towards cleaner fuel options.  

Commission  Delegated  Regulation  (EU)  2025/723  of  6  February  2025,  OJ  L,  2025/723,  16.4.2025, 
ELI: http://data.europa.eu/eli/reg_del/2025/723/oj.   

Commission Notice C/2025/3186, OJ C, C/2025/2934, 27.5.2025, ELI: http://data.europa.eu/eli/C/2025/2934/oj.  

90 Commission Decision of 12 September 2025, OJ C, C/2025/5004, 16.9.2025, ELI: http://data.europa.eu/eli/C/2025/5004/oj.  

91 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. 

92 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) 

93 Verified emissions for maritime in the Union Registry on 15 October 2025.  

35 

 
 
 
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. 
In  addition,  the  Commission  will  review  the  EU  ETS  for  maritime  transport  in  2026,  including  by 
exploring a potential extension of its scope to ships below 5 000 gross tonnage but not below 400 gross 
tonnage,  and  assessing  relevant  developments  in  the  International Maritime  Organisation  (IMO).  In 
April 2025, the IMO approved the Net-Zero Framework (IMO NZF), including a global standard for 
gradually reducing the GHG intensity of marine fuels and a pricing element for GHG emissions from 
international shipping, which the EU welcomed. The agreement, pending its adoption, is a meaningful 
step towards the goal of net-zero emissions from maritime transport by or around, i.e. close to, 2050 as 
set in the 2023 IMO GHG strategy. Discussions on the adoption of the agreement have been postponed 
until October 2026. 

11.  EU ETS implementation framework  

A  smoothly  functioning  and  environmentally  credible  EU  ETS  hinges  on  a  robust  framework  of 
monitoring,  reporting,  verification  and  accreditation (MRVA)  requirements.  These  requirements  are 
harmonised  in  the  Monitoring  and  Reporting  Regulation  and  the  Accreditation  and  Verification 
Regulation (Regulation 2018/2067)94. Countries are required to report on the implementation of these 
Regulations and of the ETS Directive every year.  

This chapter recaps the key data on the implementation of the EU ETS that countries reported under 
Article 21  of  the  ETS  Directive  for  2024.  The  implementation  framework  aspects  for  maritime  are 
detailed in Chapter 11.6.  

By 27 October 2025, the day this report was finalised, Cyprus had still not submitted their report for 
2024. In the absence of the latest available for Cyprus, this chapter uses the data reported by Cyprus for 
2023 as a proxy to make year-to-year comparison possible. For all other countries, 2024 data are used. 

11.1.  Monitoring and reporting of emissions  

The emissions’ monitoring regime 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 2024, four countries95 (five 

94 Commission Implementing Regulation (EU) 2018/2067 of 19 December 2018, OJ L 334, 31.12.2018. The regulation was 
amended  in  2020  by  Commission  Regulation  (EU)  2020/2084,  in  2024  by  Regulation  (EU)  2024/1321,  and  in  2025  by 
Regulation (EU) 2025/1192. See consolidated text. 

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

36 

 
 
 
in 2023) continued to allow installations to use  simplified monitoring plans in low-risk cases96. For 
aviation, this provision is only in use for small emitters in Belgium.  

Installations  continued  to  follow  legal  requirements  for  emissions  monitoring.  Most  used  the 
calculation-based  methodology97  to  calculate  their  emissions.  Only  274  installations  (3.2%)  in  23 
countries  reported  using  continuous  emissions  measurement  systems  (CEMS).  Of 
these, 
221installations used CEMS to measure CO2 emissions, 40 to measure N2O and 13 to measure both 
gases.  CEMS  is  used  most  frequently  in  France.  In  163  installations,  the  measured  emissions  also 
contained biogenic CO2. Of the installations using CEMS, 189 used the methodology for more than 
95%  of  their  emissions,  while  the  other  85  used  a  combination  of  CEMS  and  a  calculation-based 
methodology. 

Only 12 countries reported using the fall-back approach. This approach was used for 31 installations 
covering approximately 2.0 Mt CO2eq (six more installations than in 2023 but 0.6 Mt CO2eq lower in 
emissions’ terms). One installation in the Netherlands is responsible for 52% of the overall emissions 
reported using the fall-back methodology due to its complex set-up.  

Most installations met the minimum tier requirements98 of the Monitoring and Reporting Regulation in 
2024.  Only  97  category C  installations  (98  in  2023)  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  18  different  countries  (17  in  2023)  and  represented  17.1%  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 costs. Once these conditions no longer apply, the operator 
must improve the monitoring system accordingly. 

11.1.1.  Monitoring and reporting of emissions from municipal waste incineration 

By 31 July 2026, the Commission must assess the feasibility of including emissions from municipal 
waste incineration (and possibly other waste management processes) in the EU ETS. This assessment 
is part of a broader review of the EU ETS, for which the proposal is expected in 2026. 

Since January 1, 2024, installations for the incineration of municipal waste (above the threshold of 20 
MW rated thermal input) are required to monitor and report their emissions under the EU ETS. They 
are  not,  however,  currently  required  to  surrender  allowances  for  their  emissions.  18  countries  (17 
Member  States  and  Norway)  reported  emissions  from  combustion  of  fuels  in  installations  for  the 
incineration of municipal waste for 202499.  

11.1.2. 

 Monitoring and reporting of non-CO2 aviation effects 

96 Article 13 of the Monitoring and Reporting Regulation. 

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

98 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. 

99 Not all countries in the EU ETS have municipal waste incineration capacity or installations falling within the scope of the 
EU ETS monitoring obligation.  

37 

 
 
 
Since  1  January  2025,  aircraft  operators  must  monitor  and  report  non-CO2  aviation  effects.  The 
obligation covers sulphate and soot particulate matter, water vapour, nitrous oxides and sulphur dioxide, 
airplanes emit during the flight. To facilitate the start, until 2026, mandatory monitoring and reporting 
obligation of non-CO2 effects applies only to intra-EEA flights (including the outermost regions), as 
well as flights from the EEA to Switzerland and the United Kingdom. Voluntary reporting on all routes 
is encouraged. From 2027, the reporting obligation automatically applies to all flights. 

Aircraft operators can choose one of two methods to monitor their non-CO2 aviation effects. Method C 
is the standard method taking into account weather and flight information, along with aircraft and fuel 
properties, whereas Method D, uses a more simplified monitoring methodology to calculate emissions 
from low-emission aircraft operators, as it mainly requires flight and trajectory information. Weather 
data and data on the fuel properties can be omitted.  

To  facilitate  the  monitoring  and  reporting  process,  the  Commission  is  developing  the  NEATS 
monitoring tool. The first reports are due in 2026. 

By 31 December 2027, based on the results of the application of the monitoring framework of non-CO₂ 
aviation effects, the Commission will submit a report and, where appropriate, a legislative proposal to 
mitigate non-CO₂ effects.  

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 Regulation94, ISO 17029 and ISO 14065 (international ISO 
standards that are used to accredit verifiers). Accredited verifiers can operate with mutual recognition 
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 2024 
is included in Section 4 of the accompanying staff working document. 

In 2024, there were 94 accredited verifiers for installations, and 17 for aircraft operators. In addition, 
26  countries  reported  that  at  least  one  foreign  verifier  was  active  in  their  territory  in  2024,  and  six 
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 2024, 
Only one verifier suspension (Romania) was reported. At the same time, no verifiers were reported to 
have  had  their  accreditation  withdrawn.  In  two  cases,  verifiers’  scope  of  accreditation  was  reduced 
(Denmark and France). By comparison, no suspensions, no withdrawal of accreditation and two scope 
reductions were reported for 2023.  

The second revision of the Accreditation and Verification Regulation was adopted on 18 June 2025100. 
The purpose of the revision was to:  

• 

align with the revisions that were incorporated in the Monitoring and Reporting Regulation in 
2024: 

100 Commission Implementing Regulation (EU) 2025/1192, OJ L, 2025/1192, 19.6.2025 
ELI: http://data.europa.eu/eli/reg_impl/2025/1192/oj. 

38 

 
 
 
o 

include  requirements  on  the  verification  of  reports  on  the  non-CO2  aviation  effects, 
verifier’s checks related to the transport of CO2 and CCU, verifier’s checks related to 
biomass,  renewable  fuels  of  non-biological  origin  (RFNBO),  recycled  carbon  fuels 
(RCF), synthetic low carbon fuels (SLCF), and verifier’s checks related to alternative 
aviation fuels and fuels eligible for ETS support;   

o  specify the verifier’s role in the ETS2 for specific simple monitoring cases and further 

simplifying verification in such cases.  

•  Align  with  the  Free  Allocation  Regulation  to  include  the  verification  of  climate-neutrality 

reports. 

11.3.  Guidance documents 

The  Commission  has  developed  guidance  documents101  for  monitoring,  reporting,  verification  and 
accreditation. The aim  is to provide detailed instructions, techniques and best practice to  competent 
authorities, operators, verifiers and other stakeholders on how to implement the EU ETS. This guidance 
plays a vital role in ensuring the integrity, transparency, harmonisation and accuracy of 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 was given to the general guidance document 
for installations (published in early 2025), followed by the guidance documents for aircraft operators, 
on ‘biomass fuels and other zero-rating’, guidance on verification, etc., all of which are expected to be 
published in the second half of 2025.  

At  the  same  time  all  MRV  reporting  templates  were  updated  in  early  2025  to  accommodate  new 
provisions of the two regulations. As a final point, the ETS2 monitoring and reporting guidance is being 
updated.  The  ETS2  accreditation  and  verification  guidance  was  published  in  June  2025102.  All 
secondary guidance documents are planned to be updated through the course of 2025. 

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 
Section 4 of the accompanying staff working document. 

All countries reported having at least one central competent authority involved in implementing the EU 
ETS in 2024. In six countries, only a single, central competent authority was responsible for all EU ETS 
activities103. Where multiple competent authorities are managing EU ETS activities, countries reported 

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

102 Guidance Document, The Accreditation and Verification Regulation - ETS2 Verification Guidance, June 2025.  

103 These countries were Czechia, Denmark, Ireland, Iceland, Italy and Liechtenstein.  

39 

 
 
 
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  (11  countries),  playing  a  coordinating  role104  (ten 
countries), a central competent authority issuing binding instructions and guidance to local authorities 
(five  countries),  providing  joint  training  for  competent  authorities  (eight  countries)  and  convening 
regular working groups or meetings between authorities (14 countries).  

In 2024, 16 countries did not charge administrative fees to installation operators for the permitting and 
approval of monitoring plans (same as in 2023). Aircraft operators in 18 countries also did not have to 
pay any fees (17 in 2023). Charges varied significantly by country and type of service – from about 
EUR 19 to EUR 9 300 for a permit and approval of a monitoring plan for installations, and from about 
EUR 2 to EUR 4 700 for aircraft operators. In addition to initial approval, 13 countries reported also 
charging administrative fees of different amounts for significant changes to permits or monitoring plans. 
An overview of administrative charges in the EU ETS is presented in Section 4 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 installation 
or an aircraft 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 year.  

For each tonne of CO2 emitted for which no allowance was surrendered on time, the ETS Directive 
imposes  a  penalty  of  EUR 100105.  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  measures  and  excess  emissions  penalties  within  the  EU  ETS  is 
presented in Section 4 of the accompanying staff working document.  

In the 2024 compliance cycle, the level of compliance with the EU ETS remained very high. Like in 
recent  years,  operators  responsible  for  over  99%  of  emissions  from  power  generation,  industrial 
manufacturing and aviation met their legal obligations on time.  

The  efficiency  of  the  compliance  system  has  also  improved,  with  a  broader  uptake  of  electronic 
reporting.  In  2024,  17  countries  used  an  automated  system  for  electronic  data  exchange  between 
operators or aircraft operators. Ten 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, 12 countries (nine in 2023) allowed verifiers to carry out virtual site 
visits106. For 27 installations and 46 aircraft operators, virtual site visits were approved by the relevant 

104 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. 

105 The penalty is indexed for inflation. 

106 Article 34a of the Accreditation and Verification Regulation allows the verifier to carry out a virtual site visit if extraordinary 
and unforeseeable circumstances prevent 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. 

40 

 
 
 
competent authority. In 2024, the Accreditation and Verification Regulation was amended to extend the 
possibilities for virtual site visits for the aviation sectors. Verifiers are now also allowed to carry out 
virtual site visits beyond force majeure circumstances provided certain conditions have been met.  

Compliance checks on  annual emissions reports  are carried  out  by  all countries  that  administer any 
operators, which is not the case for installations in Liechtenstein and aircraft operators in Liechtenstein 
and  Northern  Ireland.  For  various  types  of  checks,  the  percentage  of  emission  reports  checked  are 
reported, see Section 4 of the accompanying staff working document. In 2024, Italy did not report on 
the  types  of  checks  made,  all  other  relevant  competent  authorities  checked  the  completeness  of  the 
reports  from  installations,  and  most,  including  Italy,  did  so  for  reports  from  aircraft  operators.  The 
exceptions were the competent authorities in France, Greece, Latvia and Norway, Lithuania reported 
checking emissions against other sources. 

Competent authorities in 12 countries made conservative estimates for 62 installations (approximately 
0.55% of all installations, same level as in 2023). For some installations the emissions were estimated 
for multiple years, a total of 87 estimates were made, of which 33 concerned 2024, the remainder were 
conservative estimates of previous years. Conservative estimation of emissions according to Article 70 
MRR  were  made  when  the  annual  emission  reports  were  not  submitted  in  time,  when  a  negative 
verification opinion statement was issued because of limitation of scope, material misstatement or non-
conformity provide insufficient clarity to state with reasonable assurance that the report is free from 
material misstatements. Such an estimation will also be made if the emission report is found not to be 
in compliance with the Monitoring and Reporting Regulation.  

Conservative estimates for aviation were reported by three countries (also three in 2023) concerning 17 
aircraft operators (22 in 2023).  

Checks by competent authorities remain important to supplement the work of verifiers. In addition to 
checking  emissions  reports,  18  countries  reported  that  they  had  carried  out  on-site  inspections  at 
installations (19 in 2023). Five countries107 reported on-site inspections for aviation (three in 2023).  

In 2024, 31 installations in nine countries were fined for not surrendering sufficient emission allowances 
to  cover  their  reported  emissions  (excess  emissions).  For  aviation,  excess  emissions  penalties  were 
reported by six countries for 11 aircraft operators. Regarding emissions obligations for installation, a 
total of 47 infringements were reported across 12 countries108, which resulted in 36 penalties with a 
combined total of EUR 476.5 million, formal warnings or formal notices. For installations that applied 
for  the  allocation  of  free  emission  allowances,  there  were  four  infringements  reported  across  three 
countries109, of which two resulted in fines, totalling EUR 0.07 million.  

For aviation 19 infringements across six countries were reported110, of which 13 led to monetary fines, 
totalling EUR 4.1 million. The main reasons were failure to meet emissions reporting deadlines and 
failure to surrender the required allowances. 

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

108  The 12 countries are Croatia (5), Czechia (5), Finland (1), France (4), Hungary (6), Italy (3), Latvia (1), Lithuania (2), 
Netherlands (1), Poland (18), Spain (1), and Sweden (1). 
109 The three countries are Hungary (1), Latvia (1), and Sweden (2). 
110 The six countries are Denmark (2), Croatia (2), Italy (6), Latvia (2), Spain (6), and Sweden (1). 

41 

 
 
 
11.6. 

Implementation framework for maritime transport 

The  framework  of  monitoring,  reporting,  verification  and  accreditation  requirements  applicable  to 
maritime transport is modelled on the one established for other sectors under  the  EU ETS, with the 
necessary adaptations. The Maritime MRV Regulation was revised in 2023 to allow for the EU ETS 
extension to maritime transport, notably to extend the scope of the MRV system to CH4 and N2O (from 
2026) and to set out rules to determine emissions by ships under the scope of the EU ETS and aggregate 
them at shipping company level. The relevant delegated acts to implement the system were adopted in 
2023, after which the Commission developed a set of guidance documents to help stakeholders comply 
with their legal obligations111.  

11.6.1.  Monitoring and reporting of emissions   

Shipping companies have been required since 2018 to monitor and report emissions in accordance with 
the MRV Maritime Regulation, under which companies have to provide monitoring plans, emissions 
reports, and verification reports, for each of the ships under their responsibility. From 2024, they also 
need to provide data on a per company basis, with additional data reported for the EU ETS, providing 
an aggregated report of all their ships.  

For this purpose, only one single monitoring and reporting process is required, although the data to be 
reported within the EU ETS may deviate, to a certain extent, from those to be reported under the MRV 
Maritime Regulation, e.g. regarding the scope (GHG gases, coverage of voyages), and the different 
applicable derogations as established by the EU ETS Directive. In addition, companies active under the 
EU ETS scope must fulfil additional requirements to ensure they comply with their obligations under 
the EU ETS Directive (e.g. have their monitoring plan approved by the relevant administering authority, 
open a Maritime Holding Operator Account in the Union Registry, etc.) compared to those companies 
only active under the Maritime MRV scope.  

In 2024, 3 313 shipping companies have submitted a company-level emissions report, covering 13 627 
ships. These companies reported 138.3 Mt of CO2 under the broader MRV scope112, resulting from the 
use of 44.7 million tonnes of fuel, out of which marine fossil fuels113 accounted for 99.4% of reported 
consumption114 and 0.6% benefited from zero-rating. 

The  reported  verified  emissions  at  company  level  under  MRV  scope  were  reduced,  as  recorded  in 
THETIS-MRV, to determine emissions under the scope of the EU ETS after applying the relevant rules: 
zero-rating for eligible fuels (0.7 Mt), ETS geographical scope limited to 50% of extra-EEA voyages 
(48.6 Mt), carbon capture storage and carbon capture utilisation (56 tonnes), and derogations for small 

111 At the time of writing three main guidance documents have been finalised through 2024/2025 and are currently publicly 
available: the MRV/ETS general guidance for shipping companies (Guidance Document No. 1), the general guidance on the 
process for approval of monitoring plans by administering authorities (Guidance Document No. 2), and the general guidance 
on accreditation and verification (Guidance Document No. 3).  

112 This figure covers the emissions from the ships under the responsibility of shipping companies active under the EU ETS 
scope, excluding those ships and activities which only fall under MRV scope (e.g. due to gross tonnage, ship type) and excludes 
methane and nitrous oxide emissions. The data mentioned under this section has been extracted from THETIS-MRV as reported 
in the company-level reports submitted by shipping companies on 15 October 2025.  

113 Fuels falling under the fuel class ‘fossil fuels’, in accordance with the classification under Annex I, Part A of Regulation 
(EU) 2015/757.  

114 As  in  previous  reporting  periods  under  the  MRV  maritime  system  before  the  EU  ETS  extension  to  maritime,  shipping 
companies exclusively relied on the calculation approach to determine emissions.  

42 

 
 
 
islands,  for  public  service  contracts  and  public  service  obligations,  and  for  outermost  regions  (3.9 
Mt)115.    

11.6.2.  Verification and accreditation  

As  for  other  ETS  sectors,  the  verifier  active  in  ETS  maritime  must  be  accredited  by  a  national 
accreditation  body  in  line  with  the  Accreditation  and  Verification  Regulation  and  ISO  14065  (an 
international  ISO  standard).  The  verifier  carries  out  the  various  activities  required  by  the  MRV 
Regulation to check the implementation of the monitoring plan and the data in the shipping company’s 
reports, both at ship and company level.  

In  2024,  22  accredited  verifiers  were  active  for  maritime  MRV.  Verifiers’  compliance  with  the 
accreditation and reporting rules for maritime is found to be high. For 2024, no verifier suspensions or 
withdrawal of a verifier’s accreditation were reported.  

11.6.3.  Administering authorities   

For  a  smooth  and  effective  operation  of  the  EU  ETS,  each  shipping  company  is  assigned  to  one 
administering authority in one Member State. This is the Member State to which the shipping company 
submits  the  monitoring  plan  for  approval,  the  verified  annual  emissions  report  (ER)  and  company 
emission  report  (CER),  and  which  administers  the  shipping  company  with  regard  to  its  Registry 
account. Each shipping company is assigned to its administering Member State by applying the rules 
set in the EU ETS Directive116. 

11.6.4.  Compliance with the EU ETS for maritime transport 

2025 was the first year when allowances for emissions from maritime transport were surrendered in the 
EU ETS, on the basis of what reported for 2024 activities. Shipping companies surrendered allowances 
for more than 99% of surrendering requirements 117 by the legal deadline.    

11.6.5.  Implementation of ETS2   

The  Monitoring  and  Reporting  Regulation  and  the  Accreditation  and  Verification  Regulation  also 
include the MRVA requirements for the implementation of the ETS2. To facilitate the implementation 
of  the  new  system,  the  Commission  has  prepared  guidance  documents  and  templates  for  national 
competent authorities, regulated entities and verifiers118.   

-  general guidance on the Monitoring and Reporting Regulation for ETS2 regulated entities; 

-  monitoring plan template for regulated entities; 

- 

annual emission report template for regulated entities; 

-  guidance on accreditation and verification for ETS2 

115 A further 0.5 Mt were deduced following the voluntary application of the deduction for ice-class ships.   

116 Article 3gf of the EU ETS Directive.  

117 The amount of reported due allowances is determined on figures reported by companies in the Union Registry on 1 October 
2025. 

118 ETS2: buildings, road transport and additional sectors, DG Climate Action.  

43 

 
 
 
-  ETS2 verification report template 

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)119,  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 had to submit their final updated NECPs 
by 30 June 2024.  

In May 2025, the Commission published its EU-wide assessment of the NECPs, following their updates 
to take into account the 2030 targets120. The assessment was accompanied by a staff working document 
providing an individual assessment of the first 23 plans submitted121. Subsequently, the Commission 
published its assessment of the final NECPs from Estonia and Slovakia in October 2025122. Belgium 
submitted its final NECP in October 2025. Poland is the only Member State yet to submit their final 
updated NECP. The findings of the analysis of the updated NECPs are also discussed in theClimate 
Action Progress Report 2025123.  

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 (see Chapter 8). Of the 2024 ETS revenues, 15 Member States reported 
spending EUR 3.3 billion to fund 63 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 

119 Directive (EU) 2023/1791 of 13 September 2023 amending Regulation (EU) 2023/955 (recast), OJ L 231, 20.9.2023. 

120 COM(2025) 274 final - EU-wide assessment of the final updated national energy and climate plans - Delivering the Union's 
2030 energy and climate objectives, 27.5.2025. See the accompanying staff working document.  

121 See footnote 121.  

122 Commission assessment of the final updated NECPs of Estonia and Slovakia (SWD/2025/282).  

123 https://climate.ec.europa.eu/eu-action/climate-strategies-targets/progress-climate-action/eu-climate-action-progress-
report-2025_en  

44 

 
 
 
Agreement124 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 geographical coverage, cap and 
allocation as the EU ETS. In line with Article 7 of the Linking Agreement, this continues 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  maintains  the 
environmental  integrity  of  both  systems.  Both  the  EU  ETS  and  the  Swiss  ETS  cover  respective 
departing flights to the UK and flights to/from the EU’s outermost regions. 

Tables 16 and 17 in Section 5 of the accompanying staff working document show key figures for both 
systems in 2024 – 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. Since 2024, the number of transfers between 
both systems, i.e. daily execution of transactions, increased considerably, from 156 in 2023 to almost 
800 in 2024, allowing market participants from both Switzerland and the EU to act as if they were in 
one market and 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. 

Tables 8 and 9 present the effect of the link between the EU ETS and the Swiss ETS in 2024. They 
show  to  what  extent  companies  in  either  system  used  allowances  issued  in  the  other  system  for 
compliance.  

In  total,  regulated  entities  in  the  EU  ETS  (both  installations  and  aircraft  operators)  used  1 578 101 
allowances issued under the Swiss ETS for compliance in 2024. This is  almost 440 000 allowances 
more than in 2023 and almost 605 000 allowances more than in 2022, marking an increased use of the 
flexibility  provided  by  the  link  between  the  EU  ETS  and  the  Swiss  ETS  as  well  as  a  consistently 
growing awareness and acceptance of the link. 

Installations in the EU ETS used significantly more aviation allowances issued under the Swiss ETS 
than in the previous year (around 355 000 in 2024 compared to 100 000 in 2023). They also increased 
the use of the Swiss ETS general allowances (around 700 000 in 2024 compared to 425 000 in 2023). 

The number of the Swiss ETS general allowances used for compliance by EU aircraft operators in 2024 
remained stable at around 49 000 (compared to 50 000 in 2023). The number of the Swiss ETS aviation 
allowances used for compliance by aircraft operators in the EU ETS decreased from around 560 000 in 
2023 to around 470 000 in 2024.  

124 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 

 
 
 
In  relative  terms,  allowances  issued  under  the  Swiss  ETS  accounted  for  around  0.14%  of  the  total 
allowances surrendered in the EU ETS in 2024. However, they accounted for a bigger share of 31.5% 
of all the Swiss ETS that year. 

In the Swiss ETS, aviation operators significantly increased their use of EU ETS allowances in 2024 
(79.6%) compared to 2023 (51.08%). On the other hand, installations used a lower share of the EU ETS 
allowances for compliance in 2024 (5.19%) compared to 2023 (11.6%). In both years, installations in 
the Swiss ETS did not use the EU ETS aviation allowances for compliance. In relative terms, EU ETS 
allowances constituted 31.37% of all allowances surrendered in the Swiss ETS.  

Table  10  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. The historical balance shows 
a net outflow of 1 284 657allowances from the EU ETS to the Swiss ETS. It should, however, be noted 
that the figures may include re-transfers of these allowances. 

46 

 
 
Table 8. Units used for compliance in the Union Registry in 2024. Data extracted from the Union Registry on 1 October 2025. 

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 

1 089 612 748 

1 033 244 671 

1 029 808 309 

1 025 571 370 

3 428 201 

701 150 

357 341 

% of the total 

99.59 

0.31 

0.07 

0.03 

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 

24 270 111 

62 247 419 

61 645 450 

43 299 227 

17 826 613 

49 077 

470 533 

% of the total 

70.24 

28.92 

0.08 

0.76 

Table 9. Units used for compliance in the Swiss Registry in 2024. Aircraft operators refer to those administered by Switzerland.  

Free allocation  
and auctioning 

Verified emissions 

Surrendered units 

EU ETS allowances 

Swiss ETS allowances 

General 

Aviation 

General 

Aviation 

3 891 680 

3 694 355 

3 677 899 

191 006 

5.19 

0 

- 

3 433 205 

53 688 

93.35 

1.46 

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 

1 118 087 

1 990 349 

1 990 349 

1 301 096 

283 515 

3 372 

402 366 

% of the total 

65.3 

14.24 

0.17 

20.22 

s
n
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47 

 
 
 
 
 
 
 
 
Table 10. Transfers of allowances between the EU ETS and the Swiss ETS (2020 -2024). 

Year 

2020 

2021 

2022 

2023 

2024 

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 

1 591 527 

7 436 677 

0 

1 523 770 

1 215 662 

1 837 292 

1 575 296 

6 152 020 

Balance 

1 284 657 

14.  Summary  

The report provides a comprehensive summary of the functioning of the EU ETS in 2024 and the first 
half of 2025. It shows that the system has continued to function well, underpinned by a comprehensive 
and effectively implemented framework. It also explains any changes to this framework that have taken 
or will soon take effect, chiefly the cap adjustment for 2026. 

Emissions  from  installations  have  continued  to  decrease,  driven  by  an  increase  in  the  share  of 
renewables  and  nuclear  in  the  electricity  mix  and  a  reduced  reliance  on  fossil  fuels.  Thanks  to  this 
development, ETS emissions from installations are around 50% below 2005 levels and well on track to 
achieve the 2030 ETS target.  

Further  reaching  emission  reductions  in  the  EU  ETS  in  2024  have  been  facilitated  by  
a sustained robust carbon price signal. In ESMA’s assessment, the EU carbon market remained stable 
in 2024 and continued to operate in line with market fundamentals.  

ETS  revenues  have  also  remained  a  significant  source  of  funding  climate  action  and  energy 
transformation,  with  EUR 38.8 billion  raised  in  2024,  distributed  primarily  to  national  budgets, 
alongside  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 230 billion.  

Altogether,  the  report  documents  the  EU  ETS  functioning  as  one  of  the  main  policy  incentives  for 
investment in a clean industrial transition, innovation and modernisation.  

48