S.7.1. The European Emissions Trading System

D.7.1. The European Emissions Trading System

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European Commission adopts Annual Report on the functioning of the European carbon market

Thursday, October 31, 2019

The European Commission’s (EC) Annual Report on the functioning of the European carbon market covers 2018 while also presenting certain initiatives proposed or agreed in 2019. Topics covered by the Report include:

  • EU ETS infrastructure;
  • Functioning of the carbon market (allowances put in and taken out of circulation, balancing supply and demand);
  • Aviation;
  • Market oversight;
  • Monitoring, reporting and verification of emissions;
  • Overview of administrative arrangements in Member States; and
  • Compliance and enforcement.

This year, new elements in the Report include information on the annual amounts of unallocated transitional free allocations auctioned or planned for auctioning by Member States, as well as on yearly auction revenues generated by Member States for the period 2012-2018, and on the projects funded by financial instruments such as the InnovFin Energy Demonstration Projects with re-invested funds released from the NER300 program.

The Report claims that compared to 2017, emissions from installations covered by the EU ETS decreased by 4,1%, i.e. equivalent to 71 million tonnes of CO2. The decrease is mainly due to the power sector, with only a small decrease of industry emissions. However, in the same period, verified emissions from aviation grew approximately 3,9% (i.e., representing 2,6 million tonnes of CO2).

In 2018, a strong carbon price signal led to record revenues for Member States from the sale of ETS allowances. Member States spent, or planned to spend, close to 70% of such revenues on advancing climate and energy objectives – well above the 50% mark required by law.

The EC will continue to monitor the carbon market and is scheduled to adopt the next Annual Report in late 2020.