Expanding on the existing EU ETS, the revised EU ETS will include, among other things, more extensive industrial facilities, and power plants; it will drive investment toward clean energy technologies and foster efforts to attain the European Union’s climate goals.
Aither ensures a smooth and compliant transition to ETS2 by being ahead of the curve on market trends and fluctuations, providing real-time data and expert analysis to make informed trading decisions. Our experts help you confidently navigate the complexities of ETS2 and unlock new opportunities in a carbon-conscious market.
These are new allowances, entirely separate and not interchangeable with EU Allowances (EUAs) from ETS 1.
Allowances for ETS2 will be tradable on exchanges such as ICE, with futures contracts already available since May of this year, establishing a carbon cost for covered entities.
The total supply of allowances is limited by a declining annual cap. From 2027, these allowances will be freely tradable on the market, enabling hedging and price discovery.
While price stability mechanisms are in place, future costs are highly uncertain. Forecasts for 2030 range widely from €50 to €340 per tonne of .
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The present EU ETS applies to electricity generation, heavy industry, and aviation. On the other hand, ETS2 will address a different aspect of emissions that result from buildings, road transport, and smaller industrial emitters. Both systems operate under cap-and-trade arrangements; however, under ETS2 it will be fuel suppliers rather than final consumers who will need to monitor their own emissions and purchase allowances accordingly.
It follows the principles known as “cap and trade.” A specific amount of emission allowances is set which are reduced year after year. It has been determined that direct monitoring and reporting of fuel suppliers should replace final consumers’ responsibilities for their emissions. Fuel suppliers must buy allowances for their emissions through auctions.
In general terms, its key goal is to enhance Europe’s aspirations to tackle climate change by ensuring it realizes 55% reduction in GHG emissions this decade. Additionally, it seeks to outline how proceeds from its coffers would be channeled into support for vulnerable families plus investments in clean energy technologies.
Yes, some revenues derived from allowance sales will go towards a Social Climate Fund (SCF). The fund will finance efforts aimed at supporting decarbonization initiatives in the sectors covered by ETS2.
The timeline is divided into two phases:
Monitoring and reporting: Starts in 2025. This means entities covered by ETS2 will track and report their emissions.
Full operation: Begins in 2027. This is when the allowance trading system will be fully functional.
The success of ETS2 could pave the way for its expansion to other sectors not currently covered. The effectiveness of the system will be closely monitored and reviewed to determine if further action is needed.
Non-compliance with ETS2 has varied consequences, and the degree of consequences will be under the nature and scope of the transgression. Here is a closer look at possible repercussions:
Our team provides expert support across all major compliance markets. We offer specialized hedging solutions and compliance strategies for the new EU ETS 2. We provide access to an unparalleled international portfolio of environmental commodities to meet your environmental ambitions.