CBAM-Vereinfachungen rechtskräftig

CBAM simplifications in force: What companies need to know now

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Since 20 October 2025, the new EU regulation (2025/2083) on the simplification of the CBAM system has been in force. In this article, we explain the most important changes for importers and producers of CBAM goods.

Key Amendments at a Glance

  • De Minimis Exemption: Companies importing less than 50 tonnes of CBAM goods annually into the EU during 2026 are fully exempt from CBAM reporting obligations. This exemption does not apply to imports of hydrogen and electricity. In 2025, the de minimis rule of 150 euros per delivery continues to apply.
  • Mandatory Authorization from 2026: Starting in 2026, companies intending to import more than 50 tonnes of CBAM goods annually into the EU must obtain the status of “Authorized CBAM Declarant.” Applications must be submitted no later than 31 March 2026 to avoid penalties and import restrictions.
  • Commencement of Certificate Trading: Trading of CBAM certificates via the Common Central Platform (CCP) will begin on 1 February 2027. However, certificates must already be acquired for imports made in 2026 and submitted in 2027.

Below, we present the key changes in detail. You may find all changes in the CBAM Omnibus regulation when compared to the original CBAM regulation, which has been amended by the simplifications.

New Threshold: Single-Mass-Based Threshold

To determine CBAM obligations, the newly introduced Single Mass-Based Threshold (MBS) now applies. Companies whose annual CBAM goods imports fall below this threshold are fully exempt from CBAM requirements. The MBS is calibrated to capture at least 99% of imported grey emissions in CBAM goods (based on standard values). The European Commission will review and, if necessary, adjust the threshold annually. Any changes apply from the following year, provided the adjustment amounts to at least 15 tonnes. For 2026, the MBS is set at 50 tonnes of CBAM goods. If the threshold is exceeded during a calendar year, CBAM obligations apply retroactively to all imports of that year, including those below the threshold. In 2025, the de minimis rule of 150 euros per delivery continues to apply. We recommend that EU importers contact the national authorities in their respective countries to obtain detailed information on the reporting requirements for the remaining time of the transitional period.

Application Process: Authorized CBAM Declarant

Importers may import CBAM goods in 2026 without having obtained Authorized CBAM Declarant status, provided the application is duly submitted by 31 March 2026. If the application is rejected and CBAM goods exceeding the MBS were imported, penalties will apply to all imports made in 2026 (see section on Sanctions).

Updates to Certificate Management

CBAM certificates may only be acquired from 1 February 2027 via the Common Central Platform (CCP). No acquisition will be possible prior to this date. Nonetheless, certificates must be obtained for 2026 imports and submitted in 2027. Thus, procurement of certificates for 2026 imports will occur retroactively in 2027. Certificate prices for 2026 imports will be based on the average quarterly prices in the EU Emissions Trading System 1 (EU ETS 1) during that year. From 2027 onward, importers must demonstrate, on a quarterly basis, a security reserve of CBAM certificates equivalent to 50% of the grey emissions imported during the current calendar year.

Revised Deadlines

The regulation introduces the following changes to deadlines:

  • Submission of CBAM Declarations and Certificates: No later than 30 September of the following year.
  • Buyback Requests for CBAM Certificates: Must be submitted by 31 October, provided any certificates were submitted during the current year. A maximum of certificates equivalent to the 50% security reserve may be returned. If the MBS was not exceeded, full return is permitted.
  • Certificate Expiry: Certificates from the penultimate calendar year will expire on 1 November, thereby significantly extending their validity period.

Emissions Calculation and Paid CO₂ Prices

Beginning in 2026, importers will have the flexibility to either report actual and verified CBAM data from their supply chains or rely on default values. Unverified actual data is must not be used in CBAM declarations. The European Commission is expected to publish the applicable default values for the definitive period, covering multiple countries. These values will include a penalizing mark-up designed to incentivize the use of verified actual data. In cases where no default value is available for a specific CN code and country, importers must apply the average default value of the ten worst-performing exporting countries.

Precursors originating from the EU are considered emission-free and are no longer included in CBAM emissions calculations. Effectively paid CO₂ prices along the supply chain (less any refunds or discounts) may still be credited. The EU will introduce country-specific standard values for effectively paid CO₂ prices, which may be used in the absence of verifiable actual data.

Sanctions

Sanctions continue to be aligned with the EU ETS 1 regulations (currently approx. €135 per tonne of CO₂ not reported or incorrectly reported). National authorities may reduce penalties if the error is demonstrably attributable to external auditors or foreign authorities. Payment of a penalty does not exempt the importer from submitting the required CBAM certificates.

Companies importing CBAM goods without Authorized CBAM Declarant status face significantly higher penalties: three to five times the standard rate. In such cases, the obligation to submit CBAM certificates retroactively is waived. A reduction in penalties is possible if the MBS was exceeded by less than 10%.

Conclusions

The so-called CBAM simplifications do not genuinely make the rules easier for affected importers. However, a large part of those previously affected will no longer fall under CBAM, which especially relieves smaller importers and SMEs. For producers, emission calculations become less demanding when using CBAM goods from the EU as input. Companies that remain subject to CBAM continue to face uncertainties due to the pending CBAM benchmarks, verification rules for actual data, and the yet-to-be-defined default values valid from 2026. The EU Commission is now required to clarify these issues swiftly to provide planning security and a smoother transition to the regular phase. In our blog post on CBAM cost management, you can read about options for limiting cost risks in advance.

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EU ETS Maritime and FuelEU Maritime

EU ETS Maritime: Obligations and Options for Action for Maritime Transport (Part 2)

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In the first part of this series on emissions trading in the maritime sector, we outlined the principles of the obligations. In this second part, we explain market developments in the EU ETS and the complementary FuelEU Maritime Regulation on reducing greenhouse gases in fuels.

Market and price developments for emission allowances

The European Energy Exchange (EEX) based in Leipzig and the ICE based in London act as central marketplaces for the procurement and trading of emission allowances in the EU ETS (EUAs). The EEX handles both primary and secondary market transactions, while the ICE serves the secondary market. In the primary market, all new EUAs are issued through standardised auctions, while in the secondary market there are spot and futures contracts for EU ETS obligations, intermediaries, traders and financial investors. The average EUA price in 2024 was around EUR 67/tCO2 (source: DEHSt). Analysts forecast an increase to up to EUR 200/t in the coming years (Figure 1). Price dynamics are determined by five structural drivers:

  • Stricter cap reduction: The linear reduction factor of 4.3% (2024–2027) and 4.4% (from 2028) will lead to a constant annual reduction of around 88 million EUAs from 2024 onwards
  • The gradual inclusion of shipping will bring up to 78.4 million additional EUAs into the system
  • Market Stability Reserve (MSR): If a threshold for surplus EUAs is exceeded, the MSR will withdraw and delete part of the surplus
  • REPowerEU auctions: The programme will weigh on price developments in the short term due to additional auction volumes of around 267 million EUAs between 2023 and 2026, but will lead to a correspondingly sharper supply reductions from 2027 onwards
  • Geopolitical factors: The war in Ukraine and energy price volatility are influencing EUA prices via temporarily very high correlations between gas and EUA prices, while the adoption of the ‘Fit for 55’ package has strengthened market confidence in long-term price increases

Historische Preisentwicklung und Prognosen für EU-Emissionszertifikate (EUAs) bis 2030 (Grafik carboneer)

Figure 1: Historical price development and price scenarios for EUAs until 2030 (source: carboneer, data source: EEX)

Impact of emissions pricing and possible hedging

In 2024, the financial impact of the EU ETS on shipping was still limited, despite administrative burdens. As only 40% of emissions were covered by the EU ETS, the average price per tonne of CO2 actually emitted by ships was just over EUR 25. For a ship fuelled with bunker oil, the costs for intra-Community voyages (100% coverage) increased by around 15% for entries into or exits from the EU/EEA area (50% coverage) by 7.5% (assumptions for bunker oil, price: EUR 500/t and emission intensity: 3.1 tCO2/t) Thus, the additional EU ETS costs probably did not have a major impact on the route choices made by shipping companies. Detours via Africa to avoid the Suez Canal or increased tensions in the Strait of Hormuz leading to higher insurance costs probably posed a greater economic challenge for many companies.

In 2025, the emissions covered by the EU ETS will rise to 70%. With bunker oil prices remaining constant and an assumed EUA price of EUR 70/t, CO₂ costs will double. Similarly, the coverage of all emissions from 2026 onwards will be accompanied by a further significant increase in the financial burden. Systematically hedging these price risks by purchasing emission allowances via spot or futures market contracts can both reduce price risk and secure future EUA requirements for shipping companies. The optimal strategy depends on the individual risk profile, emission volatility and available financing resources. In view of the forecast price increases for EUAs, tailor-made procurement and hedging approaches are becoming increasingly important for affected shipping companies.

With the expansion of the EU ETS to maritime shipping, charter agreements along the entire charter party chain must be redesigned. The decisive factor is who assumes operational responsibility for cargo, route or speed (often the charterer), as only this party can be held liable by the shipping company for the costs of emission allowances. Charter contracts should therefore clearly stipulate who is liable for emission costs during the various phases of the voyage and how any deviations are to be settled.

FuelEU Maritime: Complementary rules for fuels

On 1 January 2025, the FuelEU Maritime Regulation (EU) 2023/1805 came into force (source: EU) and supplements the EU ETS for ships over 5,000 gross tonnage. While the EU ETS prices absolute CO₂ quantities via a cap-and-trade system, FuelEU Maritime aims to gradually reduce the greenhouse gas intensity of on-board energy, in particular fuels. The binding reduction targets are 2% by 2025, 6% by 2030, 14.5% by 2035 and 80% by 2050. FuelEU Maritime uses a well-to-wake approach that evaluates emissions from raw material extraction to combustion on board. Alternative fuels such as biofuels or e-fuels are accounted for in a comparable manner using standardised emission factors. If a ship falls short of its annual intensity target, penalties of 2,400 EUR per tonne of VLSFO equivalent deficit will be imposed. Bunker oil or Very Low Sulphur Fuel Oil (VLSFO) serves as the basis for calculation due to its market dominance. From 1 January 2030, container and passenger ships in TEN-T (Trans-European Transport Network) ports must use shore power during layovers, with violations costing 1.50 EUR per unused kWh.

Both systems complement each other: the EU ETS limits and prices emissions, while FuelEU creates incentives for lower-emission fuels. In a further article, we will take a detailed look at the fundamentals and implications of FuelEU Maritime.

Conclusion and recommendations for action

Inclusion in the EU ETS presents shipping companies with complex challenges in the areas of emissions measurement, procurement of emission allowances and cost pass-through. The gradual introduction and supplementation with FuelEU Maritime is intended to effectively reduce emissions in maritime transport.

Risks due to administrative burdens, penalties or volatile prices in the EU ETS can be minimised through proactive and strategic planning and actions. A possible guide for action for shipping companies subject to the scheme is shown in Figure 2.

Action guide for shipping companies under EU ETS and FuelEU Maritime, outlining compliance steps, risk management and strategic options.

Figure 2: Action guide for shipping companies in the EU ETS and FuelEU Maritime (source: carboneer)

Contact carboneer for personalised advice and we will assist you with implementation and risk analysis.

Sources

DEHSt, 2025, VET-Bericht 2024, URL: https://www.dehst.de/SharedDocs/downloads/DE/publikationen/VET-Bericht-2024.pdf?__blob=publicationFile&v=7

EEX, 2025, EU ETS Auctions, URL: https://www.eex.com/en/market-data/market-data-hub/environmentals/eu-ets-auctions

EU, 2023, FuelEU Maritime Regulation, URL: https://eur-lex.europa.eu/eli/reg/2023/1805/oj/eng

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EU ETS Maritime: Obligations and options for action for maritime transport (Part 1)

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Since 2005, the EU Emissions Trading System (EU ETS) has been the European Union’s (EU) central market-based climate instrument. Since 2018, the maritime transport sector has been required to measure, report and verify emissions in accordance with EU ETS rules (monitoring, reporting, verification – MRV), and emissions pricing began on 1 January 2024. In this first part of a series on the EU ETS for maritime transport, the basics of the obligations for affected companies are explained.

This extension of the EU ETS to maritime transport was part of the ‘Fit for 55’ package and covers all ships with a gross tonnage (GT) of 5,000 or more that call at ports in the EU or the European Economic Area (EEA), regardless of their flag. Shipping companies were therefore assigned to national administrative authorities on 30 January 2024 (source: EU). This assignment list is not exhaustive, as companies may still be subject to regulation after the deadline and are obliged to comply despite not being listed. The shipping sector already contributed around 6% of EU ETS emissions in its introductory year 2024 (source: EEA) and caused around 13% of all transport-related greenhouse gases in the EU in 2021 (source: EMSA).

The first evaluation of the integration of shipping into the EU ETS by the EU Commission in March 2025 shows that over 5,000 shipping companies are registered on the European MRV platform THETIS-MRV and that verified monitoring plans for more than 15,000 ships are available (source: EU Commission). Figure 1 illustrates the geographical scope of the EU ETS for maritime transport: 100% of emissions for intra-EU/EEA voyages are covered, while 50% of emissions are subject to taxation for voyages to/from third countries. This regulation aims to prevent carbon leakage and minimise avoidance behaviour.

 

 

Scope of EU ETS Maritime

Figure 1: Example illustration of the scope of the EU ETS maritime with the 100/50% rule (source: carboneer)

Gradual inclusion of shipping

The EU ETS operates on a cap-and-trade principle with an annually decreasing emissions cap. Shipping companies must purchase corresponding emission allowances (European Union Allowances (EUA)) for each tonne of CO₂ equivalent emitted and surrender them in the Union Registry each year. Companies with low CO₂ abatement costs can sell their EUAs to companies with high abatement costs. This means that CO₂ is avoided where it is most efficient and cost-effective.

The inclusion of shipping in the EU ETS is taking place in stages. While only CO₂ emissions are subject to pricing for the time being, methane and nitrous oxide will also be priced from 2026. From 2027, the system will also cover offshore vessels with a GT of over 5000. While smaller ships between 400 and 5,000 GT have been part of the MRV since 2025, it is still unclear whether and when the emissions of these ships will also be priced. This is expected to be decided in 2026 as part of a major EU ETS review.

In addition to the gradual introduction of several ship and emissions categories, pricing will also be phased in over a three-year period. From 2024, affected shipping companies will have to surrender EUAs for 40% of their verified emissions, 70% in 2025 and 100% from 2026 (Figure 2).

EU ETS maritime implementation period

Figure 1: EU ETS maritime implementation period (source: carboneer according to EU Commission)

Responsibilities and ISM delegation

The obligated ‘shipping company’ within the meaning of the EU ETS Directive is, by default, the registered shipowner. The shipowner may contractually delegate the EU ETS obligations to the company that is responsible for ship operations under the International Safety Management (ISM) Code. A prerequisite for delegation is that a proper and complete mandate agreement in accordance with the detailed requirements of Implementing Regulation (EU) 2023/2599 has been submitted to the competent authority (source: DEHSt). The mandate agreement must document the assumption of all EU ETS obligations and be submitted to both the administrative authority and the verification body. Bareboat charters can only act as shipping companies if they are also ISM companies. The company responsible for MRV of emissions and the obligations under the EU ETS must always be identical. In practice, this requirement poses considerable challenges, as many shipping companies operate their fleets through multiple ISM managers who use different management and emission measurement procedures.

Annual obligations

The annual compliance cycle of the EU ETS for shipowners and ISM companies follows a clearly structured annual rhythm that begins even before the first port call. Before operations commence, an approved monitoring plan must be in place, which is reviewed by an accredited verifier and approved by the competent administrative authority (source: EU Commission). The verified plan must be submitted to the competent administrative authority via the THETIS MRV portal by 1 April 2024 at the latest or within three months of the first port call under EU jurisdiction. Throughout the reporting year, ships continuously record their greenhouse gas emissions using the methods defined in the monitoring plan.

By 31 March of the following year at the latest (Figure 3), this data must be verified and include both a ship-level emissions report and a company-level emissions report, which are generated via the THETIS-MRV portal.

Compliance cycle in the EU ETS (source: carboneer)

Figure 3: Compliance cycle in the EU ETS (source: carboneer)

 

A Document of Compliance can then be created via THETIS-MRV, which must be carried on all affected ships of the relevant company. In order to have sufficient buffer for any corrections, verification should begin promptly after the start of the year. Once the shipping company has assigned the verifier to the Union Registry, the verifier can confirm the verified emissions directly in the Maritime Operator Holding Account (MOHA) in the Union Registry.

At the same time, affected companies use the MOHA to purchase, trade and submit EUAs. The central compliance deadline for the year is 30 September. By this date, sufficient EUAs must be submitted via the MOHA in the Union Registry to cover the verified company emissions. To ensure that the reporting, verification and submission processes run smoothly, a tight internal schedule is recommended: continuous monitoring, early data validation by verification bodies, timely entries in THETIS-MRV and the Union Registry, and timely procurement and provision of the required EUAs.

Sanctions and measures by authorities

In the EU ETS, violations of the obligation to surrender EUAs by 30 September of each year are subject to a fine. The penalty payment is €100 per tonne of CO₂ equivalent for emissions caused in the previous year for which no EUA was submitted. Since 2012, the value has been increasing annually in line with inflation, meaning that violations in 2024 will incur a penalty of €132.06 per tonne of CO₂ equivalent (source: DEHSt). Regardless of the penalty payment, the obligation to retroactively purchase and submit the missing EUAs remains. Similarly, if EUAs are not submitted, the names of the defaulting shipping companies are for exampled published in the Federal Gazette of Germany once the decision has become final; at EU level, the Commission also maintains an annual list of non-compliant operators.

This ‘naming and shaming’ increases the reputational risk, and in the event of repeated violations in two or more reporting periods, the flag or port state authorities may, as the most severe measure, deny access to EU ports or also detain ships in the home port of an EU state. Since liability applies company-wide, a single ship violation can affect the operator’s entire fleet (source: DEHSt). Consistent measurement of emissions, timely verification and timely procurement and submission of EUAs therefore remain essential to avoid financial penalties and operational restrictions. In the second part of our series, we will look at price and market developments in the EU ETS, the cost implications for shipping companies and the complementary rules under the FuelEU Maritime Regulation.

Sources

DEHSt, 2025, EU Emissions Trading 1 for Maritime Transport, URL: https://www.dehst.de/EN/Topics/EU-ETS-1/Maritime-Transport/EU-ETS-1-Maritime-Transport/eu-ets-1-maritime-transport_node.html

DEHST, 2025, EU ETS 1 Sanctioning, URL: https://www.dehst.de/EN/Topics/EU-ETS-1/EU-ETS-1-Information/Sanctioning/sanctioning_node.html

DEHSt, 2025, Maritime Transport-FAQ, URL: https://www.dehst.de/SharedDocs/FAQ/EN/maritime-transport/FAQList-SV.html#faq-id-299956

EEA, 2025, EU Emissions Trading System data viewer, URL: https://www.eea.europa.eu/en/analysis/maps-and-charts/emissions-trading-viewer-1-dashboards

EMSA, 2025, Facts and Figures, URL: https://emsa.europa.eu/publications/item/4515-emter-facts-and-figures.html

EU, 2024, Kommission Implementing Decision EU) 2024/411, URL: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202400411

EU Kommission, 2025, FAQ – Maritime transport in EU Emissions Trading System (ETS), URL: https://climate.ec.europa.eu/eu-action/transport-decarbonisation/reducing-emissions-shipping-sector/faq-maritime-transport-eu-emissions-trading-system-ets_en

EU Kommission, 2025, Report from the Commission: Review of Regulation (EU) 2015/757 on the monitoring, reporting and verification of greenhouse gas emissions from maritime transport in relation to the potential inclusion of ships below 5 000 gross tonnage but not below 400 gross tonnage  , URL: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52025DC0109

EU Kommission, 2025, Monitoring, reporting and verification URL: https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/monitoring-reporting-and-verification_en

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The FuelEU Maritime Regulation: Emission Reduction of Fuels in Shipping

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As part of the European Union’s (EU) comprehensive ‘Fit for 55’ climate package, FuelEU Maritime (Regulation EU 2023/1805) operates since 1 January 2025 as a greenhouse gas (GHG) intensity-based mechanism within the EU’s maritime decarbonisation framework. While the EU Emissions Trading System (EU ETS) for maritime transport addresses the supply side by placing a price on absolute emissions (read our articles here and here), FuelEU Maritime is a complementary demand-side mechanism designed to promote the adoption of renewable and low-carbon fuels by setting progressively stricter GHG intensity targets for onboard fuel/energy use.

Regulatory framework

FuelEU Maritime applies to commercial vessels exceeding 5,000 gross tonnes (GT) that call at ports within the EU/European Economic Area (EEA), regardless of their flag. The regulation’s core mechanism comprises mandatory GHG intensity reduction targets measured against a 2020 baseline of 91.16 gCO₂eq/MJ, with progressive reduction requirements through reduction factors: 2% (2025), 6% (2030), 14.5% (2035), 31% (2040), 62% (2045), and 80% (2050). The regulation’s scope encompasses 100% of fuel consumption for voyages between two EU/EEA ports, 50% of fuel consumed during any journey between EU/EEA ports if one of the ports is located in an ‘outermost region’ and 50% of the fuel consumed between voyages to/from an EU/EEA port and a third country (Figure 1). The regulation prevents regulatory evasion by designating some non-EU container transhipment ports, such as Tanger-Med and East Port Said, counting as a “port of call”. The definition of a port of call excludes among others stops for non-commercial purposes such as refuelling, obtaining supplies, or drydocking.

Example illustration of the scope of the FuelEU Maritime with the 100/50% rule

Figure 1: Example illustration of the scope of the FuelEU Maritime with the 100/50% rule (source: carboneer)

A key feature of FuelEU Maritime is its Well-to-Wake lifecycle assessment. This comprehensive methodology accounts for the full emissions profile of a fuel; from its extraction or production (well) to its use on board a vessel (wake). This is in contrast to the EU ETS, which uses a Tank-to-Wake approach. FuelEU Maritime covers, besides carbon dioxide (CO₂), also methane (CH₄) and nitrous oxide (N₂O).

Flexibility mechanisms as strategic tools
Within the FuelEU Maritime framework shipping companies can use the flexibility mechanisms of banking, borrowing, and pooling. These are instruments that can be leveraged for long-term fleet optimisation and competitive advantage.

  • Banking:If a vessel reduces its GHG intensity beyond the required target, the surplus can be “banked” for use in the following reporting period. This allows over-compliant vessels to build a strategic reserve for its compliance to offset future deficits as targets become more stringent.
  • Borrowing:A ship with a deficit can “borrow” up to 2% of the following period’s target, which must be paid back with an additional 10% penalty. Note that borrowing cannot be used two periods in a row, thus it is no long-term solution.
  • Pooling:This is the most innovative mechanism, allowing vessels to share their compliance balances. A modern, “green” vessel with a surplus can allocate its excess compliance to an under-compliant vessel in the same or a different fleet, making both compliant. This creates an emerging commercial exchange of compliance surpluses within private or brokered pooling arrangements, providing a return on investment for companies that over-comply.

If none of the above compliance methods are used to remove a compliance deficit, then a financial penalty must be paid. The penalties are 2,400 EUR per tonne Very Low Sulphur Fuel Oil (VLSFO) equivalent deficit, with VLSFO serving as the calculation reference due to its market dominance. Penalties increase progressively for consecutive non-compliance, creating penalty multipliers of 10%, 20%, 30% and so forth for persistent, yearly violations.

Onshore Power Supply and fuel incentives

FuelEU Maritime also introduces specific mandates for onshore power supply (OPS) and incentives for next-generation fuels. From 1 January 2030, container and passenger ships over 5,000 GT must connect to OPS when at berth for more than two hours in a Trans-European Transport Network (TEN-T) port. This requirement for container ships and passenger ships to connect to OPS will be further expanded from 1 January 2035 to all other ports where an OPS is available. Onshore power non-compliance incurs penalties of 1.50 EUR per unused kilowatt-hour, calculated against total electrical power demand during applicable berth periods. The regulation also provides a powerful incentive for Renewable Fuels of Non-Biological Origin (RFNBOs) by applying a 2x multiplier to their energy content in GHG intensity calculations until 31 December 2033 . This multiplier makes RFNBOs significantly more valuable for compliance and helps de-risk early investment in these fuels.

Annual compliance cycle

The compliance cycle follows structured timelines as outlined in Figure 2: Monitoring begins 1 January according to an approved monitoring plan and the FuelEU report must be submitted to accredited verifiers by 31 January of the year following the monitoring period. Should there be a change of company, a partial report should be verified within one month after the company transfer. Verifiers must complete verification and record results in the THETIS-MRV (platform and database for CO2 emissions from ships for compliance with EU regulations)by 31 March of the following year, followed by flexibility mechanism (banking, borrowing, or pooling) declarations by 30 April. By 30 June, a valid Document of compliance (DoC) must be obtained by the respective ship. If penalties are due, the DoC is only issued upon proof of payment. Importantly, if a ship is subject to FuelEU Maritime after 31 August 2024, a monitoring plan must be submitted to the verifier no later than two months after the first port call at a port falling under the regulation’s scope.

Compliance cycle in the FuelEU Maritime

Figure 2: Compliance cycle in the FuelEU Maritime (source: carboneer)

THETIS-MRV platform integration and data management
THETIS-MRV is the European Maritime Safety Agency’s (EMSA) centralised IT platform serving as the single digital gateway for EU maritime environmental compliance. It integrates both EU ETS and FuelEU Maritime reporting and verification requirements through unified data submission while maintaining separate regulatory processing pathways. As illustrated in Figure 3, the platform connects distinct compliance processes: EU ETS follows ship-level monitoring through company-level reporting to allowance surrender, while FuelEU Maritime progresses from ship-level monitoring through flexibility mechanisms to penalty calculations.

THETIS-MRV for EU ETS Maritime and FuelEU Maritime

Figure 3: THETIS-MRV for EU ETS Maritime and FuelEU Maritime (source: carboneer)

Unlike in the EU ETS, FuelEU Maritime uses GHG intensity-based compliance without tradeable allowances, with penalties automatically calculated by the TETHIS-MRV system. The platform enables operators to submit integrated datasets once, eliminating duplicate data entry while processing tank-to-wake calculations for EU ETS and well-to-wake assessments for FuelEU separately. Data accuracy becomes critically important because a single error in the shared dataset can negatively affect both EU ETS and FuelEU Maritime compliance.

Conclusion and recommendations

The FuelEU Maritime regulation is a complex legislation that requires a strategic response. A failure to comply exposes companies to significant financial and operational risks.

  • For ISM (International Safety Management) companies in the maritime sector the legal responsibility is non-transferable. ISM companies must secure contractual rights and financial guarantees from shipowners to cover potential penalties and compliance costs. The development and implementation of new contractual clauses are not optional but essential for risk management.
  • Shipowners must ensure that charter party agreements contain robust, updated clauses that transfer financial responsibility for FuelEU penalties to the charterer who controls fuel selection and trading. This is a critical step in aligning risk with control.
  • For charterers the fuel choice is now a strategic financial decision. Investing in or procuring low-carbon fuels and leveraging flexibility mechanisms like pooling are essential for maintaining long-term competitiveness and avoiding financially burdensome penalties.

 

Authors: Florian Schlennert, Simon Göß

 

Sources:

Regulation (EU) 2023/1805, 2023, Official Journal of the European Union, URL: https://eur-lex.europa.eu/eli/reg/2023/1805/oj/eng
Britannia P&I, 2024, FUEL EU MARITIME REGULATIONS, URL: https://britanniapandi.com/wp-content/uploads/2024/11/FUEL-EU-MARITIME-REGULATIONS.pdf
DNV, 2024, FuelEU Maritime Compliance, URL: https://www.dnv.com/maritime/insights/topics/fueleu-maritime/compliance/
BIMCO, 2024, FuelEU Maritime Clause for Time Charter Parties 2024, URL: https://www.bimco.org/contractual-affairs/bimco-clauses/current-clauses/fueleu-maritime-clause-for-time-charter-parties-2024/
NOW GmbH, 2023, Factsheet FuelEuMaritime Oktober 2023, URL: https://www.now-gmbh.de/wp-content/uploads/2023/10/NOW_Factsheet_FuelEuMaritime_Oktober-2023.pdf
DNV, 2024, FuelEU Maritime: How to prepare for compliance, URL: https://www.dnv.com/news/2024/fueleu-maritime-how-to-prepare-for-compliance/#:~:text=The%20FuelEU%20Maritime%20GHG%20intensity%20requirements%20apply%20to%20100%25%20of,Responsible%20shipping%20company
BetterSea, 2024, Ice Class and FuelEU Maritime: Navigating Compliance in Harsh Conditions, URL: https://www.bettersea.tech/post/ice-class-and-fueleu-maritime
BetterSea, 2024, FuelEU Compliance Timeline, URL: https://www.bettersea.tech/post/fueleu-compliance-timeline
DNV, 2024, EU ETS – Role of data for handling the EU ETS, URL: https://www.dnv.com/maritime/insights/topics/eu-emissions-trading-system/role-of-data-for-handling-the-eu-ets/
SAFETY4SEA, 2025, Focus in maritime decarbonization: The current regulations and challenges at a glance, URL: https://safety4sea.com/focus-in-maritime-decarbonization-the-current-regulations-and-challenges-at-glance/
European Commission, 2024, Questions and Answers on Regulation (EU) 2023/1805, URL: https://transport.ec.europa.eu/transport-modes/maritime/decarbonising-maritime-transport-fueleu-maritime/questions-and-answers-regulation-eu-20231805-use-renewable-and-low-carbon-fuels-maritime-transport_en
DNV, 2024, External Webinar FuelEU EU-ETS 12Dec2024, URL: https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/attachments/79905583/4a690ecc-5925-49ef-8248-4d314667808a/DNV_Webinar_FuelEU_EU-ETS-12Dec2024.pdf
EMSA, 2024, Webinar FuelEU 04 June – General Process, URL: file:///C:/Users/FlorianSchlennertcar/Downloads/Webinar%20FuelEU%2004%20June_EMSA%20-%20General%20Process%20(1).pdf

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The EU ETS 2: A Guide for Companies

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The European Emissions Trading System 2 (EU ETS 2) will complement EU ETS 1, which has been active since 2005, and it is an important instrument to reduce emissions within the EU by 55% by 2030. Emissions from the use of fuels in buildings, road transport, energy, manufacturing, construction and in small industrial plants are covered by EU ETS 2 since 2024 – totalling around 35% of all EU emissions. For the approximately 12,000 companies affected in the EU, the EU ETS 2 means new obligations that are accompanied by economic challenges.

From 2027, the responsible companies will have to purchase emission allowances in the amount of the emissions in the fuels they sell. The market-based pricing of emission allowances means that they will be exposed to greater uncertainty and volatility. In Germany, the EU ETS 2 is implemented by the comprehensively amended Greenhouse Gas Emissions Trading Act (TEHG) and replaces the national emissions trading system (nEHS).

The transition from the nEHS to the EU ETS 2 in Germany

While the nEHS mechanism worked with an annually increasing, staggered fixed price corridor for emission allowances without a quantity limit since 2021, the emission allowances for 2026 are to be auctioned within a price corridor (source: BMUKN). The EU ETS 2, on the other hand, will introduce an EU-wide and annually decreasing emissions cap right from the start in 2027. The cap will start with a quantity of just over 1 billion allowances and will decrease by 5.38% annually from 2028 onwards.

Due to the quantity of available emission allowances for obligated companies decreasing annually and their auctioning, the price in the EU ETS 2 is determined by supply and demand. Like the nEHS, the EU ETS 2 is an ‘upstream’ system, which defines responsible entities in line with their liability for payment of energy tax. The obligation to report verified emissions and submit emission allowances therefore lies with companies bringing fuels into consumption such as fuel distributors. This means that most entities responsible for the nEHS will also be obliged to do so under the EU ETS 2.

Companies will therefore have a dual reporting obligation for emissions between 2024 and 2026, for both the nEHS and the EU ETS 2, with the nEHS fully transferring to the EU ETS 2 from 2027.

Design and special features of the EU ETS 2

From 2027, the auctioning of emission allowances in the EU ETS 2 will take place via an EU-wide platform, which is yet to be determined. The price will be determined by the balance between the supply of allowances and companies’ demand for them. While this market mechanism is efficient, it also carries the risk of high prices and volatility. Several price damping mechanisms have been integrated to prevent unchecked price increases and facilitate the market launch.

  • Frontloading will temporarily increase the auction volume by 30% in 2027 to facilitate the market launch, and this volume will be withdrawn again between 2029 and 2031.
  • The volume-based Market Stability Reserve (MSR) will withdraw emission allowances from the market in the event of an oversupply or release them again in the event of a shortage.
  • Price triggers also exist: if the price exceeds EUR 45/tCO₂ or doubles/triples in the short term, limited quantities of allowances are released from the MSR. However, this is not a hard price cap.
  • As a final safety net, the start of the system can be postponed to 2028 if energy prices are high; a decision on this will be made by 15 July 2026.

The price question: Do high abatement costs lead to high certificate prices?

Despite the damping mechanisms that have been implemented, analyses indicate that the price level in the EU ETS 2 is likely to remain high and volatile. This is due to the structurally high marginal abatement costs in sectors where the fuels are used. While e-mobility makes decarbonising the transport sector comparatively cheap, the building sector is sluggish due to long investment cycles and renovation rates of often less than 1% per year. This sectoral inertia, particularly in the building sector, means that even high emission certificate prices only lead to necessary emission reductions slowly.

Modelling by the EWI forecasts an equilibrium price starting at around 120 EUR/tCO₂ in 2027, rising to over 200 EUR/tCO₂ by 2035 (Quelle: EWI). However, even at these high prices, the European climate target for the buildings and transport sectors in 2030 would not be met. The target would only be achievable with a price for emission allowances of at least 250 EUR. For end customers of fuels, this would result in significant cost increases, potentially reaching 50% for heating oil and 32% for natural gas by 2035. To cushion the social and economic hardships, the European Climate Social Fund will be set up in 2026 with funding of up to EUR 86.7 billion until 2032. This fund is intended to support vulnerable households and (micro)enterprises.

Figure 1 shows the price scenarios of various organisations, as well as the prices of traded futures market products for emission allowances in the EU ETS 2. Despite the different assumptions underlying these scenarios, the trend is clear: even in the most optimistic scenario, prices for emission allowances will remain relatively high, with the futures market products already traded on the Intercontinental Exchange (ICE) and the European Energy Exchange (EEX) showing prices of about 80 EUR/tCO₂.

Price forecasts and scenarios for EU ETS 2 emission allowances from Vertis, Clear Blue Market, Veyt, BloombergNEF as well as ICE and EEX futures (as of 08.07.2025)

Figure 1: Price forecasts and scenarios for the EU ETS 2 (Vertis, Clear Blue Market, Veyt und BloombergNEF) and prices of traded futures market products (ICE and EEX Future, prices from 08.07.2025)

Futures as a strategic hedging instrument

Forecast prices of up to 120 EUR/tCO₂ from 2027 represent a significant cost risk for obligated companies. As emission allowances in the EU ETS 2 can only be purchased at auctions from 2027 onwards, futures contracts on established exchanges such as the ICE or EEX are the central instrument for managing this risk. Futures are standardised contracts that allow the future purchase of certificates to be hedged at a fixed price today, thereby converting an unpredictable risk into a predictable expense. Trading in EU ETS 2 futures on the ICE began in May 20252025 (source: ICE) and on the EEX in July 2025 (source: EEX). The current price of around 80 EUR/tCO₂ for futures contracts provides an initial indication of how prices could behave in the first years of auctions.

Price hedging requires a clear business strategy. Companies must define their risk profile and decide which of their expected obligations to hedge and when, in order to protect themselves from price fluctuations. At the same time, it is important not to miss out on the opportunity of falling markets altogether. Overall, this is a complex process in which several risk factors must be considered and weighed up, depending on the company’s profile.

A practical roadmap for the implementation of EU ETS 2 in Germany

The implementation of EU ETS 2 for companies in Germany is governed by the amended TEHG and the detailed requirements of the German Emissions Trading Authority (DEHSt). The ‘EU ETS 2 responsible parties’, i.e. distributors of fossil fuels, are primarily affected. Their core obligations are clearly defined: First, they must apply for an emissions permit and submit a monitoring plan and have them approved by the DEHSt.

Based on this, they must then measure, calculate and report emissions annually (source: DEHSt). From the reporting year of 2025 onwards, the emissions report must be verified by an accredited verification body. This is followed by the annual surrender of emission allowances. For the first time, this will take place on 31 May 2028 for emissions in the fuels sold during 2027 (see Table 1).

The first relevant deadline for obligated entites was 30 June 2025. By this date, applications for emissions permits and monitoring plans for EU ETS 2 had to be submitted to DEHSt. A crucial aspect of achieving legal certainty during the transition period until 2027 is the ‘notional authorisation’. An existing, approved monitoring plan in the nEHS is provisionally valid as an emissions permit for EU ETS 2. However, it does not exempt fuel distributors from the formal obligation to submit an application by the aforementioned deadline. DEHSt’s central tool for fulfilling these obligations is the ‘Form Management System’ (FMS), which features the new ‘3-in-1 monitoring plan’ (nEHS, EU ETS 1/waste, and EU ETS 2). Companies can use this system to import their nEHS data and add specific information for EU ETS 2. The permitted use of national standard factors for calculating emissions will make time-consuming in-house analyses unnecessary in the transition phase up to 2027 in many cases.

Table 1: Tasks and timetable in the nEHS and EU ETS 2

Task Responsible Deadline Actions
nEHS obligations nEHS obligated parties By 30.09.2027 Existing obligations under the BEHG
Application for emission permit / submission of monitoring plan EU ETS 2 EU ETS 2 obligated parties 30.06.2025 Use of the existing monitoring plan from nEHS and submission via the DEHSt FMS
Emissions report EU ETS 2 for 2024 (unverified) EU ETS 2 obligated parties Autumn 2025 (one-time) Conduct emissions accounting
Emissions report EU ETS 2 from 2025 (verified) EU ETS 2 obligated parties (and Verifier) 30.04. of the following year Conduct emissions reporting and submit emissions report / Select verifier
Procurement of EU ETS 2 allowances EU ETS 2 obligated parties From 01.01.2027 Develop strategy for procurement, hedging, and cost pass-through / Procurement
Allowance surrender from 2027 EU ETS 2 obligated parties 31.05. of the following year Surrendering of EU ETS 2 allowances in the Union Registry

EU ETS 2 between high prices and political uncertainty

Analyses show that high marginal abatement costs can potentially lead to high, market-driven certificate prices. In addition to these economic realities, there is significant political uncertainty that is crucial for companies’ strategic planning. Calls from some Central and Eastern European EU member states to postpone the EU ETS 2, operational issues with implementation in various EU countries, and the still unclear design of national compensation measures create an unstable environment. As a result, the system faces the challenge of achieving ambitious climate goals without jeopardizing social acceptance or economic competitiveness (source: EU Parlament).

Success therefore depends heavily on political decisions and instruments that ensure trust in the implementation of EU ETS 2. This includes preventing a weakening of the strict cap through premature interventions, as well as designing effective social cushioning mechanisms. Examples include the EU-level Social Climate Fund or Germany’s Climate and Transformation Fund.

For companies, this creates the need for strategic “de-risking”: existing uncertainties can be minimized through proactive measures (see Figure 2). This means assessing financial risks, adjusting supply contracts, and thinking early about procurement strategies and hedging for emission certificates. It also involves viewing emission reduction and decarbonization efforts—both internally and for customers—as strategic safeguards against future, unavoidable CO₂ costs.

Recommendations for companies on preparing and implementing EU ETS 2 – strategies for cost management, risk mitigation and decarbonisation

Figure 2: Calls for action regarding the EU ETS 2

Sources
BMUKN, 2025, Referentenentwurf einer zweiten Verordnung zur Änderung der Brennstoffemissionshandelsverordnung, URL: https://www.bundesumweltministerium.de/gesetz/referentenentwurf-einer-zweiten-verordnung-zur-aenderung-der-brennstoffemissionshandelsver-ordnung

EWI, 2025, Auswirkungen und Preispfade des EU-ETS 2, URL: https://www.ewi.uni-koeln.de/de/publikationen/auswirkungen-und-preispfade-des-eu-ets2/

DEHSt, 2025, Leitfaden Überwachungsplan EU-ETS 2, URL: https://www.dehst.de/SharedDocs/downloads/DE/eu-ets-2/leitfaden-ueberwachungsplan.pdf?__blob=publicationFile&v=2

ICE, 2025, EUA 2 Futures, URL: https://www.ice.com/products/83048353/EUA-2-Futures/expiry

EEX, 2025, Environmentals, Futures, URL: https://www.eex.com/en/market-data/market-data-hub/environmentals/futures

Europäisches Parlament, 2025, ETS2 – Status and concerns, URL: https://www.europarl.europa.eu/RegData/etudes/BRIE/2025/772878/EPRS_BRI(2025)772878_EN.pdf

 

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Emission trading in Germany: Revenue, key developments and prospects

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Germany’s emissions trading systems are undergoing fundamental changes. The EU emission trading system (EU ETS 1) faced declining revenues, while the national system (nEHS) sets new revenue records. What drives these developments, and how will upcoming regulatory shifts – from CBAM to the EU ETS 2 – shape Germany’s carbon pricing landscape?

EU ETS 1: Declining revenue with potential upside

The EU ETS 1, which regulates emissions from energy-intensive industrial plants, intra-European aviation, and maritime transport, saw a significant decline in German auction revenue in 2024. The total revenue from auctioning the EU ETS 1 emission allowances (EUA) amounted to approximately EUR 5.5 billion marking a 28% decrease from the EUR 7.7 billion recorded in 2023 (Figure 1). This decline was driven by two main factors: a reduction in the number of EUAs auctioned and a fall in the average EUA price in 2024 compared to 2023 (UBA, 2025).

Figure 1: Auction revenues from the EU ETS 1 in Germany 2023-2025 (source: DEHSt, 2025a)

To reinforce climate goals, the EU continues to reduce the quantity of available EUAs. In 2024, the auctioned amount for Germany dropped to 85 million, down from 92 million in 2023. Additionally, the average price per EUA decreased from 83.66 EUR/tCO2 in 2023 to 65.00 EUR/tCO2 in 2024, reflecting lower demand from the energy and industrial sectors due to higher shares of renewables in the electricity grid and weaker economic conditions. Despite this, the 2024 average price remained 24% higher than the 2021 level, showcasing the long-term strengthening of emissions pricing.

Since the end of 2024, the allowance price in the EU ETS 1 has rallied amid the expectations of lower supply of allowances and thus higher prices during 2025. While the price stood at 65 EUR/tCO2 mid December 2024, it has risen by almost 25% and sometimes traded at above 80 EUR/tCO2 in February 2025. The EUA price expectations for the year 2025 ranges between 80-90 EUR/tCO2 indicating both a tightening of supply and thus likely higher auction revenues again this year.

Record revenues in Germany’s national emission trading system

Unlike the EU ETS 1, the German national emissions trading system (nEHS), which covers emissions from heating and transport, witnessed an increase in revenue. In 2024, revenue from the nEHS reached EUR 13 billion, up 21% from the EUR 10.7 billion recorded in 2023 as Figure 2 shows. This increase was primarily due to a rise in the fixed price of nEHS certificates from €30 per tonne in 2023 to €45 per tonne in 2024 (UBA, 2025).

Figure 2: Sales revenues from the nEHS in Germany 2023-2025 (source: DEHSt, 2025b)

A total of 278 million nEHS certificates were sold on the European Energy Exchange (EEX) in Leipzig in 2024 at the new fixed price, generating approximately EUR 12.5 billion. An additional 17 million certificates for 2023 were sold at the previous year’s price of 30 EUR/tCO2, adding another €500 million to the total revenue. Despite a lower number of certificates sold compared to 2023 (which saw 358 million certificates sold), the revenue increase was sustained by the price hike.

Total revenues from emission pricing at record high

Germany’s combined revenue from the EU ETS 1 and nEHS reached EUR 18.5 billion in 2024, surpassing the EUR 18.4 billion in 2023 and significantly exceeding the EUR 13 billion in 2022. These funds are allocated to the Climate and Transformation Fund (KTF), which finances initiatives supporting Germany’s energy transition and decarbonisation goals.

Dirk Messner, President of the German Environment Agency (UBA), emphasized that emissions trading must continue to be a driving force for climate protection, economic competitiveness, and social sustainability. He advocates for a climate bonus to support households affected by rising carbon prices, alongside targeted subsidies to assist vulnerable groups in transitioning to climate-friendly alternatives (UBA, 2025).

Regulatory developments: Aligning national legislation

The German Bundestag passed the TEHG-Europarechtsanpassungsgesetz 2024 in the end of January 2025, aligning national regulations with the reformed emission trading rules of the EU. Key aspects of this reform include (BMWK, 2025):

  • Inclusion of maritime transport: From 2024, 40% of emissions from shipping are covered under EU ETS 1, increasing to 70% in 2025 and 100% in 2026.
  • Stricter emission caps in aviation: Starting 2024, airlines face lower emission limits, and for the first time, they must report non-CO2 climate effects such as contrail formation.
  • Transition to the EU ETS 2 in 2027: The new European emissions trading system for transport and heating will replace the German nEHS and other national carbon pricing schemes of EU Member States.
  • Implementation of the Carbon Border Adjustment Mechanism (CBAM): CBAM introduces carbon pricing for imports of energy-intensive products such as steel, cement, and aluminum, ensuring fair competition within the EU market. A transition phase is underway, with full financial obligations beginning in 2026.

At the start of 2025, the fixed CO2 price in the nEHS rose from 45 to 55 EUR/tCO2 (compare Table 1), a step that has been planned since the introduction of the system in 2021. This gradual increase allows citizens and businesses time to transition to greener alternatives and will also likely lead to higher sales revenues during 2025 again. With the nEHS being absorbed into the EU ETS 2 from 2027, price for emissions in those sectors will be based on free auction prices.

Year Price EUR/tCO2 Mechanism
2021 25     Fixed price  
2022 30
2023 30
2024 45
2025 55
2026 55-65 Auction with price corridor
From 2027 45-100 (estimates) Auction with free market price (EU ETS 2)
Table 1: Development of emission pricing in the sectors covered by the nEHS

The 2025 price hike in the nEHS is expected to have only moderate impact on fuel costs. The price per liter of gasoline and diesel may rise by around 3 cents. However, fuel prices fluctuate due to external factors such as global oil prices, which often cause greater price variability than carbon pricing alone. For an individual driving 15,000 km annually, the expected cost increase will be around EUR 50 per year (Bundesregierung, 2025).

Conclusion and future trajectory

As the EU emission trading framework expands, carbon pricing evolves as central mechanisms for climate policy. While the EU ETS 1 faced revenue declines due to economic fluctuations and market adjustments, the nEHS saw record revenues driven by increased carbon pricing. Germany’s total revenue from emissions trading reached an all-time high, reinforcing the importance of dedicating these funds to climate mitigation and social equity initiatives.

The price increase in the nEHS, the expected higher prices in the EU ETS 1, the introduction of CBAM and the launch of the EU ETS 2 in 2027 mark significant milestones in the transition towards a carbon-neutral economy. As Europe moves towards its 2050 net-zero target, emissions trading will remain a cornerstone of environmental and economic policy.

Sources

BMWK, 2025, Bundestag beschließt umfassende Reform des Emissionshandels, URL: https://www.bmwk.de/Redaktion/DE/Pressemitteilungen/2025/20250131-bundestag-emissionshandel.html

Bundesregierung, 2025, CO2-Preis beträgt jetzt 55 Euro, URL: https://www.bundesregierung.de/breg-de/aktuelles/co2-preis-kohle-abfallbrennstoffe-2061622

DEHSt, 2025a, Auctioning report: Fourth Quarter 2024, URL: https://www.dehst.de/SharedDocs/downloads/EN/auctioning/2024/2024_report_Q4.pdf?__blob=publicationFile&v=3

DEHSt, 2025b, Sales report: Fourth Quarter and entire year 2024, URL: https://www.dehst.de/SharedDocs/downloads/EN/nehs/sales-reports-nehs/2024/2024-Q4_sales-report.pdf?__blob=publicationFile&v=3

UBA, 2025, Revenue from emission trading one again at record level, URL: https://www.umweltbundesamt.de/en/press/pressinformation/revenue-from-emissions-trading-once-again-at-record

 

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EU ETS Maritime

Effective CBAM Cost Management (Part 2): Cost-Mark Ups, Procurement Strategies and Hedging

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In our first article in this series, we derived the demand for CBAM certificates to be submitted annually and the associated explicit CBAM costs based on a specific case study. To effectively manage the strategic and financial impact of CBAM, this article presents CBAM cost mark-ups at product level as well as strategies for procuring CBAM certificates and hedging options.

CBAM cost mark-ups and contractual adjustments

Our fictitious importer of 100,000 tonnes of steel ingots has an initial indication of the liquidity required for imports in 2026 by estimating the need for CBAM certificates and the associated costs. To manage these additional costs of around EUR 10 million at the company level and integrate them into supplier or customer contracts, it is necessary to determine the additional CBAM costs per supplier or per product group and import process. This allows for the consideration of the CBAM costs per product or the influence on gross margins per product during pricing.

The additional CBAM costs should be included in the risk analysis. It is particularly relevant whether real emission values are available or whether an authorised CBAM applicant must use default values in the CBAM declarations. The latter are subject to a penalising mark-up, which means higher CBAM costs.

Our analyses show that the cost differences between the two options are often immense. For example, some of our customers do not incur any CBAM costs in the first years of the CBAM definitive phase when using real emission values. If the importer were to import the same CBAM goods and (must) use default values for reporting, price increases of over 40% could occur as early as of imports in 2026 (see examples in Figure 1).

Additional CBAM costs per product level depending on verified vs default emission values (source: carboneer CBAMCC model)

Figure 1: Additional CBAM costs at commodity level depending on real or default values for emissions (source: CBAMCC model by carboneer)

In many cases, CBAM requires a change to supply or sales contracts. A risk and cost analysis as described above should be taken into account, for example by:

  • Requiring guaranteed and verified emission values from suppliers,
  • Setting price discounts in the event of missing data,
  • Adjusting the purchase or sales prices of goods depending on the CBAM emissions.

In addition, CBAM certificates for imports in 2026 will not be issued until February 2027. This means that costs that will only be incurred in 2027 will already have to be taken into account for contracts and budget planning in 2026. Without the explicit inclusion of additional CBAM costs today, affected companies would have to bear the costs incurred in 2027 due to the purchase of CBAM certificates alone.

Cost management through CBAM certificate procurement strategies

The limited validity and the 50% holding obligation during the year (final decision still pending) of CBAM certificates requires ongoing CBAM certificate management. Obligated companies should therefore develop a procurement strategy for CBAM certificates that covers the following, tailored to the respective risk and company profile:

  • Liquidity constraints and risk profile
  • Potential for cost pass-through in the supply chain
  • Planning and purchasing processes and timeframes
  • Price volatility in the EU ETS

An optimal procurement strategy for CBAM certificates should take the above-mentioned boundary conditions into account individually and must also be statistically superior. To illustrate the differences between procurement strategies, Figure 2 compares the procurement of CBAM allowances at the end of each quarter with a strategy that uses technical analyses of prices in the EU Emissions Trading System (EU ETS). The fictitious CBAM certificate prices are based on the auction prices in the EU ETS in 2022-2024.

Comparison of CBAM certificate procurement strategies showing cost differences between regulation-driven and SMART import-based approaches (source: carboneer CBAMCC model)

Figure 2: Comparison of two procurement strategies for CBAM certificates (regulation-driven strategy in green, SMART import-based strategy in blue) based on fictitious CBAM certificate prices in the years 2022-2024 (source: carboneer CBAMCC model)

Depending on the timing and quantity of CBAM certificate purchases, large price differences can occur, as prices in the EU ETS are subject to fluctuations and therefore have a direct influence on the prices for CBAM certificates. However, cost advantages can be achieved with the help of intelligent procurement strategies. The SMART import-based strategy of Figure 2 was particularly successful when analysed over several years and enabled the importer in the case study to make savings in the millions. Over an observation period of 10 years, the strategy developed by carboneer allows for almost 20% cost savings compared to a purely regulation-driven procurement of CBAM certificates. Active procurement can therefore reduce the explicit costs of CBAM certificates, thereby reducing financial risk, conserving liquidity and providing a competitive advantage.

Hedging of CBAM costs via the EU ETS

As purchased and unused CBAM certificates will be cancelled on 1 October of the second year after purchase (final decision still pending), they cannot be used for the submission obligation in the long term. However, for orders whose actual import date is further in the future or for longer-term cost certainty, an importer can take a further step to minimise risk.

As CBAM certificate prices are based on the prices of emission allowances (EUAs) in the EU ETS, the EU ETS provides a market that enables a hedging transaction. An importer can therefore hedge in advance the maximum CBAM certificate costs during an order or for future planned imports, at least in good approximation. The same principle also applies to the producer or supplier of a CBAM product, as they can guarantee the buyer in the EU maximum CBAM costs through a hedging transaction. This price fixing enables negotiations with suppliers, the calculation, adjustment or passing on of CBAM costs to downstream customers and better budgeting of CBAM certificate costs. Hedging can be used by purchasing physical EUAs or derivative market products on EUAs.

Medium to long-term hedging of CBAM certificate costs based on physical EUAs or futures market contracts purchased in 2025 (currently at EUR 70/tCO2) enables price fixing at the lower end of the expected CBAM costs for the future and, in our case study, savings of several million euros per year. Price hedging as outlined requires integration into the corporate strategy due to its complexity.

Forecast of CBAM certificate costs with and without hedging strategies via EU ETS (source: carboneer CBAMCC model)

Figure 3: Cost forecast for CBAM certificates of the importer in the case study without hedging (green) and with hedging (blue). (Source: carboneer CBAMCC model)

To manage CBAM costs effectively, minimise risks and enable planning security, it is essential to analyse exposure at an early stage. The cost of CBAM certificates is likely to be higher than many market participants and prospective CBAM declarants currently realise. Although there are some uncertainties with regard to CBAM costs, tools such as CBAMCC can already be used today to develop customised scenarios and, based on these, strategies for procuring and hedging CBAM certificate costs.

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Effective CBAM Cost Management (Part 1): CBAM Certificate Demand and Explicit Costs

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In the first part of a series on effective CBAM cost management, we use a specific case study to derive the CBAM certificate requirements and the resulting explicit costs. Importers of CBAM goods may already incur high costs for imports in 2026 and should prepare for this at an early stage.

Assessing the financial impact of CBAM

While only reporting obligations apply for importers or indirect customs representatives in 2025, CBAM will enter the regular phase from 2026 (review our article on CBAM here). Above all, this means that, in addition to continuing to report imported goods and corresponding emissions, authorised CBAM declarants will have to acquire CBAM certificates for the embedded emissions contained in the imports from 1 January 2026 and submit them annually by 31 August of the following year. From the perspective of an importer or indirect customs representative, this has strategic relevance and the impact on risk and liquidity management of this additional financial burden should therefore already be analysed in 2025 in order to:

  • Plan a budget for the procurement of CBAM certificates
  • Develop a purchasing strategy for the acquisition of CBAM certificates
  • Manage or hedge price uncertainties of CBAM certificates and thus costs for imported goods
  • Adapt supplier and customer contracts to avoid being stuck with CBAM costs
  • Integrate the effects of CBAM into strategic purchasing decisions

The steps for developing a targeted strategy for CBAM cost management are described below using a case study. The starting point is to determine the relevant CBAM emissions, as this determines the quantity of CBAM certificates to be purchased. The following formula shows the most important parameters. To simplify matters, the assumption here is that no CO2 prices were paid in the upstream supply chain.

Calculation of the demand for CBAM allowances and relevant data sources (without taking into account CO2 prices in the upstream supply chain)

Figure 1: Calculation of the demand for CBAM allowances and relevant data sources (without taking into account CO2 prices in the upstream supply chain)

In addition to the information on the imported products and the embedded emissions they contain, the CBAM benchmarks are particularly relevant for calculating the quantity of CBAM certificates to be purchased. The CBAM benchmarks are expected to be published in Q4 2025. and will be based on the benchmarks for determining the free allocations in the EU Emissions Trading System (EU ETS). The CBAM benchmarks will therefore only be officially announced relatively shortly before the date on which CBAM allowances are purchased. However, a scenario analysis can already be used today to estimate the CBAM certificate requirement with the aid of the corresponding EU ETS benchmarks.

Analyse of the CBAM certificate demand

To illustrate the approach, the following case study uses an annual import volume of 100,000 tonnes of steel ingots in equal parts each quarter. Other important assumptions for modelling the CBAM certificate demand are:

  • No deductible CO2 prices in the upstream supply chain
  • Direct specific emissions: 2.58 tCO2/tproduct
  • Indirect specific emissions: 0.43 tCO2/tproduct
  • Use of a combination of EU ETS benchmarks as a proxy for the CBAM benchmark
  • Inclusion of indirect emissions from 2030 (envisioned in the CBAM Regulation, not yet part of the legal text)

The quantity of CBAM certificates to be purchased annually for the CBAM declarant in the case study is shown below. The importer must purchase over 130,000 CBAM certificates for its imports in 2026, which corresponds to pricing of 50 % of the imported direct specific emissions. This means that a significant proportion of embedded emissions could be priced right from the start of the CBAM definitive phase. This depends in particular on the level of embedded emissions in the imported CBAM goods and therefore on the CO2 intensity of the production process of the corresponding manufacturer. An analysis per import unit, CBAM product and supplier can provide information on important metrics such as the absolute and relative contribution to the need for CBAM certificates.

Estimation of CBAM certificate demand for 2026-2034 with import of 100,000 tonnes of steel ingots per year
Figure 2: Estimation of CBAM certificate demand for 2026-2034 with import of 100,000 tonnes of steel ingots per year (source: carboneer CBAMCC model)

Important: The quantity of CBAM certificates that must be held by CBAM applicants for imported goods is 50% of the imported emissions since the beginning of the year at the end of each quarter (final decision still pending), with an exemption to this rule for imports in 2026, as CBAM certificates can only be purchased from 2027 onwards. However, the actual quantity of CBAM certificates to be submitted is ultimately based on the verified embedded emissions of the imported goods or the standard values of the EU Commission that are yet to be published. This difference between verified emissions values and default values can be significant in some cases. A precise analysis of the relevant imports and associated embedded emissions is essential for estimating the need for CBAM allowances from 2026 onwards.

Cost estimate and liquidity demand for CBAM certificates

The annual costs for CBAM certificates assuming constant import volumes in our case study can now be estimated. Forecasts and scenarios for emission allowance (EUA) prices in the EU ETS can be used for this purpose, as CBAM allowance prices for imports from 2027 are formed on a rolling basis by the weekly average of EUA auction prices (currently at around 70 EUR/tCO2). The carboneer CBAMCC model uses price projections from various publications for this purpose. The projected costs for the CBAM certificates for constant annual imports are shown below; the uncertainty factor due to uncertain price developments in the EU ETS is illustrated by the bars.

Forecast of CBAM certificate costs for 2026-2034 for imports of 100,000 tonnes of steel ingots per year

Figure 3: Forecast of CBAM certificate costs for 2026-2034 for imports of 100,000 tonnes of steel ingots per year (source: carboneer CBAMCC model)

The liquidity requirement for CBAM certificates for the importer or CBAM applicant in the case study increases from around EUR 10 million for imports in 2026 to EUR 25-45 million in 2030. CBAM certificates are neither tradable between companies nor valid in the long term. CBAM certificates purchased under the 50% holding requirement in the previous year can be sold back to the regulatory authority, while excess CBAM certificates will be cancelled on 1 October of the second year after purchase without compensation (final decision still pending). Obligated companies should therefore prepare to understand the financial impact of CBAM.

In our next article, we will go into detail about the options available to importers to manage risk and hedge their CBAM certificate costs.

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Carbon markets: Which role does biomass play?

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Although compliance and voluntary carbon markets vary in scope, mechanisms and participants, biomass occupies a unique place. In compliance carbon markets such as the EU ETS, participants are obliged to monitor and report their emissions and ultimately pay for them. Using biomass in industrial facilities can allow for reduced financial burdens. Regulators set rules around biomass use and sustainability criteria to comply with. A large part of voluntary carbon market credits is generated by nature-based solutions, including forestry and other biomass-related projects. These projects are however under intense scrutiny due to issues regarding transparency and associated climate claims. Novel carbon removal solutions with biomass as feedstock show promising development and renewed regulatory oversight could restore trust.

Which CO2 and which carbon markets?

To assess the relevance of carbon markets for biomass and vice versa, requires an understanding of different types of emissions and how carbon markets account for them. The sources of CO2 emissions and their final sink can be categorized into four main pathways (Figure 1).

  • Unabated carbon emissions from fossil sources add emissions to the atmosphere (grey and black)
  • Abated emissions from fossil sources through carbon capture and storage (CCS) with long-term storage might not add additional GHG emissions to the atmosphere (purple)
  • Negative emissions through nature-based or technological carbon dioxide removal (CDR) solutions taking CO2 out of the atmosphere and storing it durably (green)
  • Utilisation of CO2 through carbon capture and utilisation (CCU) technologies, where the ultimate source of the CO2 (atmospheric or fossil) and the final product into which the CO2-molecules has been transformed determine the climate impact (blue)

Detailed analysis of the technological pathways, supply-chain emissions, and substitution effects is required to establish emission reduction potentials of these solutions.

Figure 1: Different pathways of CO2: fossil emission, CCS, CCU and carbon dioxide removal. Source: carboneer

Compliance and voluntary carbon markets both incentivise emission reduction or carbon removal, however each from a different angle. Compliance carbon markets aim to fulfill national or regional climate targets. By putting a price tag on emissions and they incentivise compliant actors to reduce their emissions in a cost-efficient way. The mechanics of voluntary carbon markets (VCM) aim at financially supporting projects that either reduce emissions or provide negative emissions through CDR. Private actors can purchase carbon credits from project developers to offset or neutralise their corporate emissions.

The EU ETS: zero rating for biomass

The EU ETS is one of the largest and most mature compliance carbon markets. Since its inception in 2005, the EU ETS has been a cornerstone of EU climate policy, covering 35-40% of the region’s emissions. Large industrial facilities, such as steel mills, chemical plants, cement kilns, and power plants as well as aviation and maritime transport operators need to monitor and report their annual emissions. For each ton of CO2-eq emitted, the compliant entity must surrender an emission allowance. The price of this allowance is determined at the market. Currently, many industrial facilities still receive free allowances. To prevent carbon-leakage while facing out this free allocation, the Carbon Border Adjustment Mechanism (CBAM) requires importers of certain goods from non-EU countries to report the embedded carbon emissions in imports and from 2026 onwards also to pay the same carbon price as EU-based industry. Most emissions from buildings and road transport in the EU are not yet subject to a carbon price. This changes with the new EU ETS 2 covering another 35-40% of the EU’s GHG emissions. Since 2024, suppliers of liquid, gaseous or solid fuels are required to monitor and report emissions released by their fuels at the end-user. Pricing in the EU ETS 2 starts in 2027.

Carbon in biomass ultimately comes from the atmosphere. When combusted, only CO2 stored in the biomass is released back to the atmosphere. However, for a comprehensive life cycle assessment, factors such as land-use emissions due to biomass harvesting or emissions along the value chain need to be considered. According to current regulations, emissions from biomass and biofuels in the EU ETS 1, CBAM and EU ETS 2 can generally be counted as zero, thus reducing the number of allowances to be purchased by compliant entities and reducing their costs (Figure 2). Depending on the type of biomass and its utilisation, compliance with the Renewable Energy Directive for sustainability or GHG saving criteria needs to be achieved.

Figure 2: Criteria for biomass utilisation in the EU ETS 1. Source: carboneer

VCM: Carbon removal with biomass

Forests, mangroves, biochar kilns and waste-to-energy plants with CCS all have in common that they are examples of biomass-based project on the VCM. Private entities purchase carbon credits from project developers to offset or neutralise their (hard-to-abate) emissions. These projects either reduce emissions or remove CO2 from the atmosphere and must follow certain standards and methodologies for project set-up and emission calculation. Third-party verification of the projects’ climate effects is needed to create trust and transparency in voluntary carbon markets where regulatory oversight is only rudimentary.

While a wide range of VCM methodologies and projects exist, biomass-based projects are ubiquitous and particularly divers. Many biomass VCM projects potentially create negative emissions (to stay within the targets of the Paris Agreement, estimates for the required global carbon removal capacity range from 5-10 Gt/year or 5-20% of today’s total emissions). While trees might store atmospheric carbon for decades, technological solutions, such as pyrolysis with biochar or bioenergy with CCS remove carbon for hundreds or thousands of years. Project developers and buyers of credits on the VCM need to navigate complexities arising from cost considerations, project types and quality, and applicable methodologies and standards (Figure 3).

Figure 3: Carbon removal solutions and considerations for VCM projects. Source: carboneer

To reduce the lack of credibility that has plagued the VCM and associated climate claims of credit buyers, the EU currently develops its own methodologies under the Carbon Removal Certification Framework. As corporates are increasingly under pressure to develop credible climate strategies, carbon removal solutions utilising biomass have their role to play. Several announcements of large-scale credit purchases by corporates from biochar and bioenergy with CCS project developers underscores that point.

Biomass and carbon markets: the take-aways

CO2 is not CO2: The ultimate origin of the molecule matters. Compliance and voluntary carbon markets assess emissions from different perspectives and objectives. Due to the wide array of biomass applications, rules on eligibility as well as on emission accounting in compliance and voluntary carbon market differ. Biomass use in the ETS can reduce costs for industrials and allow for decarbonisation at the same time. Biomass enables carbon removal solutions, but stakeholders need to navigate the murky waters of voluntary carbon markets. Finally, interactions between the EU ETS and the VCM might be restored against the backdrop of industrial carbon management policies, the need to scale carbon removal and to provide market stability in the ETS. Complexities abound when biomass meets carbon markets.

This article appeared first in Bioenergy International No 1-2024

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The EU ETS 2 – pricing emissions in buildings and road transport

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The European Union’s Emissions Trading System (EU ETS) constitutes a cornerstone of the EU’s strategy to combat climate change since its establishment in 2005. The new EU ETS 2, implemented from 2024 covers emissions from buildings, road transport, and additional sectors such as fuel use in small industrial installations. The EU ETS 2 is founded upon the objectives of the EU Climate Law and the Fit-for-55 package and requires the fuel suppliers to monitor and report emissions in their fuels. From 2027 when the EU ETS 2 is fully operational, emission allowances need to be purchased and surrendered based on the emissions in the fuels sold. This new emission trading system adds a further layer of complexity to the regulatory compliance landscape.

Key facts about the EU ETS 2

The EU ETS 2 will be running in parallel to the EU ETS 1 and encompasses areas that were previously excluded, such as the buildings and road transport sectors. The operational principle of the EU ETS 2 is based on a cap-and-trade system, where an annually decreasing cap is set on total emissions and a corresponding number of allowances is auctioned to regulated entities. One allowance needs to be surrendered per ton of CO2 emitted. The EU ETS 2 is designed to reduce emissions by 42% by 2030 in comparison to 2005 levels. In contrast to the EU ETS 1, which regulates emissions at the point of origin, the EU ETS 2 places the compliance burden upstream at the release for consumption of fuels and not at the point where fuels are combusted. Estimates of the EU Commission expect up to 11.400 fuel suppliers, distributers and resellers to be regulated (regulated entities). This new system harmonises national and EU responsibilities, targets and emissions pricing.

To determine emissions under the scope of the EU ETS 2, a comprehensive monitoring, reporting, and verification (MRV) system is implemented at the company-level. To avoid double counting, emissions from fuel combustion under the EU ETS 1 should not be counted in the EU ETS 2. This requires fuel suppliers and their clients to provide proof and documentation in such cases. The EU ETS 2 permits the coexistence of national carbon taxes with the EU ETS 2, allowing EU Member States to exempt companies from EU ETS 2 requirements until 2030 if national measures are more stringent. In Germany the national ETS is only fully integrated into the EU ETS 2 from 2027 onwards, which makes a double reporting of emissions necessary for 2024 – 2026.

First compliance deadlines in 2024

For companies subject to the EU ETS 2, key compliance activities should already be ongoing, and deadlines are approaching soon. Companies must commence monitoring emissions by January 2024 and report those emissions by 30 April 2025. The timeline for compliance is stringent, as Figure 1 indicates.

Figure 1: Timeline of EU ETS 2 compliance obligations. Source: carboneer

To monitor emissions in accordance with the rules of the EU ETS 2, by 31 August 2024 a monitoring plan should be submitted to the competent national authority. Full compliance, especially procuring and surrendering allowances under the EU ETS 2 is required from 2027, and failure to meet these deadlines can result in significant penalties and legal repercussions, making it imperative for companies to commence preparations without delay. The potential consequences of non-compliance include financial penalties and loss of competitiveness.

From 2027 onwards allowances under the EU ETS 2 will be auctioned. An allocation of free allowances such as during the start of the EU ETS 1 and currently still applied to EU industry will not exist. To regulate the supply of allowances and maintain price stability, a market stability reserve will be implemented. The initial allowance cap in 2027 will be determined by applying a 5.1% annual reduction to the 2024 emission level. From 2025 onwards, this linear reduction factor increases to 5.38%. This implies that the total supply of allowances in 2027 will be approximately 1.25 billion, declining to below 800 million by 2030. Figure 2 illustrates the decline in the allowance auction volumes over time, aligned with the EU’s long-term sectoral climate targets.

Figure 2: Approximate EU ETS 2 allowance supply. Source: carboneer

Challenges and complexity

The EU ETS 2 presents a significant challenge for companies as they need to develop comprehensive emission monitoring plans, detailing their activities, fuel types, and emission calculation methodologies to comply with their obligations. Especially the calculation of the emissions can be a complex undertaking. First, a scope factor needs to be established to determine the portion of a company’s fuel sales that lie within the regulated activities, such as buildings and road transport. The scope factor ranges from 0 (no fuel in scope) to 1 (all fuel in scope). This ensures only relevant emissions are counted. Using the correct emission factor for different fuels along with the quantity of fuels, the total CO2-emissions can be calculated.

To ensure data quality, the MRV follows a tier system that categorises data accuracy from Tier 1 (least accurate) to Tier 4 (most accurate). Higher tiers, used for companies with more larger fuel streams and thus higher emissions, require more precise data, ensuring reliable results. Importantly, emissions from fuels based on biomass can be zero-rated if they fulfil the criteria on biomass under the Renewable Energy Directive (RED) II and the upcoming RED III.

Monitoring plans must gain approval from the competent national authority, underscoring the importance of early and thorough preparation. The emission reporting for 2024 is due 30 April 2025, with third-party verification becoming mandatory from the 2025 emission report on. The introduction of the EU ETS 2 pricing can result in significant cost increases, which will have an impact on both operational expenses and consumer prices. Figure 3 displays price forecasts for the allowances in the EU ETS from different sources. As prices are determined through demand and supply, they can be expected to exhibit significant volatility, with forecasts ranging from €48 to €340 per tCO2 by 2030. Companies ought to manage cost risk via tailored procurement strategies for EU ETS 2 allowances.

Figure 3: Forecast of EU ETS 2 allowances prices in 2030. Data Source: UBA, 2024, Source: carboneer


The Social Climate Fund plays a crucial role in mitigating the financial impact on vulnerable consumers in the EU. Its objective is to support vulnerable households and micro-enterprises that are impacted by the transition to a low-carbon economy. The fund, financed by revenues from the auctioning of allowances, provides financial assistance for measures that reduce emissions and energy costs. One example is the provision of subsidies to enhance the energy efficiency of residential properties such as improvements to insulation and the installation of more efficient heating systems. This dual focus on households and businesses ensures a broader impact, promoting social equity and economic resilience, and helps to offset some of the financial burdens and operational challenges posed by the EU ETS 2.

To understand the potential impact of the rising allowance prices, Figure 4 illustrates how different fuel types are being impacted by different allowance prices.

Figure 4: Price impact on different fuels under varying EU ETS 2 allowance prices. Source: carboneer

What should an EU ETS strategy entail?

Due to the complexity of the EU ETS 2 and its stringent timeline, a sound EU ETS 2 strategy is essential. But what does a company need to prepare for?

MRV details and compliance cycle

  • Development of comprehensive monitoring plans that cover all relevant activities, fuel types, and emission calculation methodologies
  • Monitoring plans must be approved by national authorities
  • Verification of emissions

Compliance obligations:

  • Detailed understanding of the EU ETS 2 rules and associated regulation
  • Build capacity, assign responsibilities, internal and external communication
  • Access to registries and EU ETS 2 allowances

Financial impact assessment:

  • Assessment of EU ETS 2 exposure and cost forecasts
  • Implementation of strategies to manage costs and pass on costs to consumers
  • Risk management and allowance procurement strategies to reduce financial exposure

Conclusion

The EU ETS 2 is a crucial tool in the European Union’s strategy to combat climate change by establishing a new cap-and-trade system for fuels in sectors such as buildings and road transport. It aims to reduce emissions by 42% by 2030 compared to 2005 levels. The system introduces complex obligation for companies that require planning and a compliance strategy, including stringent monitoring, reporting, and verification processes starting from 2024. With allowance prices expected to rise significantly, the financial implications are substantial and necessitate robust risk management and hedging strategies. Companies should act now to understand and navigate these new regulations, ensuring compliance and maintaining competitiveness.

Authors: Florian Schlennert and Simon Göß.

Sources: UBA, 2024, Supply and Demand in the ETS 2, URL: https://www.umweltbundesamt.de/publikationen/supply-demand-in-the-ets-2

 

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