Changes in EU emissions trading: on the road to climate neutrality

Measures at EU level

Overview

To achieve the ambitious EU targets, gradual measures are being taken in emissions trading:

• In 2024, the total amount of CO₂ allowances will be reduced by 90 million tonnes, followed by a further reduction of 27 million tonnes in 2026. In addition, a linear reduction factor will be introduced, amounting to 4.3 % annually from 2024 to 2027 and 4.4 % from 2028 to 2030.
• At the same time, the free allocation of allowances will be gradually reduced until it is completely discontinued in 2034.

Changes in the EU ETS I

From 2024, additional stationary facilities will be included in the EU ETS: refining of oil, production of iron or steel, production of primary aluminium or alumina, drying or calcination of gypsum or production of plaster boards and other gypsum products, production of carbon black, production of hydrogen (H2) and synthesis gas, and transport of greenhouse gases for geological storage. Consequently, for installations that are now included in the EU ETS I, the requirements of the Austrian Emissions Certificate Act (EZG) will already apply from 1 January 2024.

Aviation is a significant part of the EU ETS I and undergoes the following changes:

• The free allocation of emission allowances for aviation activities will be gradually phased out. In 2024, 25 % fewer allowances will be allocated free of charge, followed by a further 50 % reduction in 2025. From 2026, all allowances for aviation activities will be auctioned.
• In addition, five million allowances from this sector have been reserved for the Innovation Fund to promote the development of promising, climate-friendly aviation fuels. This is intended to create incentives for the aviation sector to reduce its emissions and develop innovative, sustainable solutions.
• The reforms will be implemented gradually from 2024 and consider international commitments such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) by the International Civil Aviation Organization (ICAO).

A new milestone is the inclusion of maritime transport in the EU ETS I. For the first time, emissions from maritime transport will be included in the system. Shipping companies will have to gradually surrender emission allowances: 40 % of verified emissions from 2024, 70 % from 2025 and finally 100 % from 2026. With this measure, the EU aims to take responsibility for lower-emission maritime shipping.

Consideration is also being given to including municipal waste incineration installations ("waste incineration") in the EU ETS. Starting in 2024, EU Member States will be required to submit reports on their emissions, which the European Commission will use by mid-2026 to assess inclusion in the EU ETS from 2028 onwards. The Commission is also considering the possibility of including other waste management operations in the EU ETS, in particular landfills, which cause methane and nitrous oxide emissions in the EU.

Formal changes are being introduced regarding the recurring deadlines for submitting the emissions report (by 31 March), booking the allocation (by 30 June) and surrendering the allowances for the previous year (by 30 September).

New trading system (EU-ETS II)

A second trading system, the so-called EU-ETS II, will also be introduced. It will be of particular significance for Austria. This new scheme focuses on CO₂ emissions from fuels (mainly fuel and energy suppliers to end consumers) in buildings, road transport and other sectors, especially in commercial production.

The EU ETS II sets an ambitious trajectory with an annual reduction of 5.1 % for 2025 to 2027. From 2028, the annual reduction factor will increase to 5.38 %. It will operate exclusively through auctions. In 2027, 30 % more allowances than usual will be placed on the market, which will then be deducted from the auction volumes in 2029 to 2031 ("front loading"). In addition, 600 million allowances will be transferred to the market stability reserve in 2027 to maintain price stability during trading.

Carbon leakage and border adjustment

The EU emphasises the importance of avoiding carbon leakage to prevent the relocation of production activities from countries with stricter climate protection measures. For this purpose, the Carbon Border Adjustment Mechanism (CBAM) has been introduced. This mechanism taxes imports of certain emission-intensive products from countries with lower climate protection measures or subjects them to CO₂ allowances (CBAM allowances). This is intended to give foreign companies similar climate protection obligations as companies in the EU in order to prevent undesired carbon leakage.

Implementation in Austria

The EU Directive must be transposed into national law by 31 December 2023, except for some special areas.

We are looking forward to the specific implementation in Austria. The amendment to the Austrian Emission Certificate Act (EZG) is intended to establish the national administrative law framework for the changes.[1] It is currently being prepared. A corresponding draft is not yet available.

[1] See https://www.bmk.gv.at/themen/klima_umwelt/klimaschutz/eu_emissionshandel/aktuelle_entwicklung.html#nationale-rechtliche-umsetzung