EU ETS 2
As part of the 2023 revisions of the ETS Directive, a new emissions trading system named ETS2 was created, separate from the existing EU ETS. This new system will cover and address the CO2 emissions from fuel combustion in buildings, road transport and additional sectors (mainly small industry not covered by the existing EU ETS).
The ETS2 will become fully operational in 2027. Although it will be a ‘cap and trade’ system like the existing EU ETS, the ETS2 will cover emissions upstream. It will be fuel suppliers, rather than end consumers such as households or car users, that will be required to monitor and report their emissions. These entities will be regulated under the ETS2, which means they will be required to surrender sufficient allowances to cover their emissions. Regulated entities will purchase these allowances at auctions.
The ETS2 cap will be set to bring emissions down by 42% by 2030 compared to 2005 levels.
