Expansion of the emission trading system

Expansion of the emissions trading system

In 2023, the European Union decided to expand the emissions trading system to include the maritime transport sector and the use of fuels in other sectors (mainly in the building and transport sectors). In the case of fuels in the building and transport sectors, those companies that sell these fuels are included in the emissions trading system. End users experience the effect of the emissions trading on the basis of rising fuel prices. This new emissions trading system is called ETS 2 (Emission Trading System = ETS), in comparison to the previous emissions trading system, which is now called ETS 1. Maritime transport has been included in the ETS 1 rules. ETS 2 is kept separate as other allowances will be used that cannot be exchanged for ETS 1 allowances.

Companies that are subject to ETS 2 are referred to as "regulated entities". In Austria, a national registry has been established with the National Emission Allowance Trading Act (NEHG, 2022), and its technical possibilities for integration into the European system are being examined. In both systems, from 2025 onwards, distributors must monitor emissions and open emissions trading accounts. Emissions of these fuels (determined by calculation) are defined as the emissions that occur when the respective fuel will be burned. ETS 2 allowances have to be purchased at auctions. A price stability mechanism is implemented to prevent excessive price increases. In the first few years, allowances from a separately established market stability reserve will be released for auction if the CO₂ price exceeds € 45. EU Member States will spend the equivalent amount of the EU ETS 2 auction revenues for measures related to climate, decarbonization and social funds. The climate social fund aims to support the most affected social groups, especially households affected by energy or transport poverty. For emissions as of 2027, allowances have to be surrendered corresponding to the verified emissions by the regulated entities. The total amount of allowances for the ETS 2 will be defined for 2027 and will be reduced linearly, so that by 2030 a reduction in the building and road transport sectors will reach 43% compared to 2005. There will be exceptions for fuels used in ETS 1 activities so that the carbon price for these emissions will not have to be paid twice.

Furthermore, a Carbon Border Adjustment Mechanism (CBAM) is introduced. During the pilot phase, it will include the iron and steel, fertilizer, cement, electricity and aluminum sectors. With the help of this mechanism, customs for imports of these products into the EU will have to be paid. They will generally correspond to the CO₂ price in the EU. Exceptions are foreseen for imports from countries that have already introduced a carbon price. However, if the emissions trading system of the exporting country is not comparable to the EU ETS, e.g. because the CO₂ price is lower, the respective price difference is due. Corresponding to the mechanism, free allocation in the ETS 1 for sectors included in the CBAM will gradually be reduced over the period of 2026 to 2033. As of 2034, allowances for affected sectors will no longer be allocated for free in the ETS 1.

You find more information on the homepage of the Bundesministeriums für Finanzen:

Carbon Border Adjustment Mechanism (CBAM) (bmf.gv.at)