EU Emissions Trading System (ETS)
The EU Emissions Trading System (ETS) is the world’s first carbon market. It works on a "cap and trade" principle whereby companies must buy enough emission allowances to cover the carbon emissions they emit through their activities (one allowance = right to emit 1 tonne of CO2 equivalent). Allowances are sold in auctions and may be traded.
Who does the ETS apply to?
Traditionally, the ETS applied to sectors like power generation and heavy industry. But that changed when it was expanded to Maritime transport in 2024, and will change again when ETS2 comes into force in 2027 for road transport and buildings too.
How does the ETS work?
Emissions allowances are sold in auctions and may be traded between companies. The cap on the number of allowances available is reduced year-on-year, which means fewer allowances are available in the auctions. Under the ETS, companies must monitor and report their emissions annually and surrender enough allowances to fully account for their annual emissions. If these requirements are not met, heavy fines are imposed.
How does the ETS impact LSPs and carriers?
While the ETS and ETS2 aren't specific to LSPs and carriers, but they will have an impact on fuel costs and thus should not be overlooked. Fuel suppliers will pass on the costs of allowances to customers, meaning diesel and other fossil fuels will become more expensive over time.
So what can you do? Start tracking your fuel consumption and emissions now so that you can understand how much of each fuel you're using and the emissions you're emitting. Then you can start introducing measures to reduce your reliance on diesel and fossil fuels before ETS2 comes fully into effect.
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EU Emissions Trading System (ETS)
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