EU ETS2 - The EU's new quota system

What is ETS2?

The EU ETS is an emissions trading system that aims to reduce greenhouse gas (GHG) emissions by limiting these emissions in certain sectors.

As part of the revision of the ETS Directive in 2023, a new system called ETS2 was created, which is different than the existing EU ETS. This new system covers and addresses CO2 emissions from fuel consumption in buildings, by transport and in other businesses, mainly small industries, which are not covered by the current EU ETS.

ETS2 will be fully operational in 2027. It covers upstream emissions, meaning that fuel suppliers, and not end consumers such as households or car owners, must monitor and report their emissions. These suppliers are regulated under ETS2, which requires that they submit sufficient quotas to cover their emissions. The quotas are purchased at auctions. The purpose of ETS2 is to supplement the EU's other green policies and help member countries achieve their emission reduction targets. The goal is to reduce emissions by 42% by 2030 compared to 2005 levels.

Who will be affected by EU ETS2?

The quota scheme affects those who pay tax on fossil fuels used for combustion, and thus the following businesses are affected:

• The building industry – including combined heat and power plants and heating plants that supply heat to companies and public institutions.
• Road transport – with the exception of farm vehicles.
• The energy sector, as well as industry and construction – companies in these sectors that use fossil fuels will also be affected.

what does eu ETS2 mean for your business?

• Fuel suppliers and other regulated entities are required to monitor and report their CO2 emissions, as well as submit an equivalent number of quotas to cover those emissions.
• All quotas are sold through auctions, and a part of the revenue generated will be used to support vulnerable households and businesses.
• Rules are determined for the annual compliance cycle, which includes a thorough verification of emissions data to ensure accuracy and compliance.
• The European Commission provides detailed guidelines and templates to ensure a uniform understanding and implementation across the member countries.