EU ETS 2 Launching in 2027: Key Steps for Emissions Trading in Buildings & Transport

EU ETS 2 launches in 2027, expanding emissions trading to the buildings and transport sectors. Companies placing fuels on the market must prepare early. Here are the key steps:

• Observe deadlines:
  • By 31.08.2024: Submit monitoring plan.
  • By 30.04.2025: Submit first emissions report for 2024.
• Track emissions: Document according to EBeV 2022 (e.g., fuel type, CO₂ quantities).
• Plan CO₂ costs: Monitor market prices, create a budget with a risk buffer.
• Implement measures:
  • Technical: Energy management systems, modern heating systems.
  • Organizational: Employee training, set energy targets.
• Ensure compliance: Review documentation, conduct audits.

Important: Early preparation minimizes costs and risks. Use EU ETS 2 as an opportunity to make your processes more climate-friendly and strengthen your market position.

EU ETS 2 Core Components

New Sectors under EU ETS 2

EU ETS 2 introduces a separate emissions trading system for buildings, road transport, and other industries. It is based on an “upstream” approach: companies that place fuels on the market (such as gas suppliers) are responsible for the emissions. Covered are energy-relevant fuels, including products like petroleum coke—primarily affecting companies already subject to the BEHG. This expansion is a significant step in the EU’s broader climate strategy, aiming to address emissions from sectors that have previously been difficult to regulate under the original EU ETS framework. According to the International Carbon Action Partnership (ICAP), this move is expected to cover a substantial share of previously unregulated emissions, thus accelerating the EU’s path toward climate neutrality (source).

Carbon Pricing System

The system creates an independent market for CO₂ certificates, which are traded via auctions. This market-driven approach is designed to ensure cost-effective emissions reductions by allowing companies to buy and sell certificates as needed. The auctioning mechanism also provides price signals that encourage investment in low-carbon technologies, with revenues often earmarked for climate action and innovation funds across the EU.

"The European Emissions Trading System 2 (EU ETS 2) is a new independent system for buildings, road transport, and other industrial sectors." – DEHSt

Key Implementation Dates

The introduction of EU ETS 2 will be phased in:

The reporting phase begins in 2024, and the first emissions report for 2024 must be submitted by 30 April 2025. Companies should also prepare a monitoring plan for 2025 and apply for an emissions permit. This structured timeline gives companies a clear roadmap for compliance and allows for the gradual integration of new reporting and monitoring systems.

Important: Fuels already covered by EU ETS 1 remain unaffected. Municipal waste incineration plants continue to report their emissions under EU ETS 1.

Meeting EU ETS 2 Requirements

Emission Tracking Requirements

Emission tracking under EU ETS 2 is based on the requirements of EBeV 2022. Emissions from fuel consumption must be fully and consistently documented. The key documentation points include:

Once emissions are recorded, the focus shifts to managing CO₂ certificates.

Managing CO₂ Certificates

CO₂ certificates must be systematically managed to meet requirements. This includes:

• First emissions report: Submission by 30 April 2025 at the latest for the 2024 reporting year.
• Monitoring plan: Submission for the 2025 reporting year.
• Documentation: Retain all relevant documents for at least ten years.

The EU Monitoring and Reporting Regulation (2018/2066) governs the requirements for monitoring and reporting emissions in the EU ETS as a whole, including EU ETS 2.

Emissions Monitoring Systems

Technical monitoring of emissions requires reliable systems to accurately record fuel types and quantities. These systems must:

• Apply calculation factors correctly
• Conservatively estimate data gaps
• Ensure seamless documentation

The calculation of reportable emissions follows a set formula, which also accounts for deductions to avoid double counting and double charging. Precise documentation of fuel data is especially important, particularly for deliveries to EU ETS installations. According to the European Environment Agency, robust monitoring and verification are central to maintaining the integrity of the system and ensuring that reported emissions accurately reflect actual activities (source).

EU ETS II: Buildings and Road Transport

Cost Control and Emissions Reduction

Preparing for EU ETS 2 requires more than just technical data collection—tax and operational management are also crucial. For example, the European Commission highlights that revenues from certificate auctions can be used to support vulnerable households and invest in sustainable mobility, making cost management a strategic as well as operational priority (source).

Planning the CO₂ Cost Budget

A well-structured CO₂ cost budget is key. Use historical data, market analysis, and risk buffers to optimize your planning. Here are a few important points:

• Analyze past emissions to estimate future certificate needs.
• Monitor market prices to identify favorable purchasing times.
• Set up a risk buffer to cushion unexpected price fluctuations.
• Check for possible government funding programs or subsidies.

A structured budget lays the foundation for targeted emission reduction measures. According to Clean Energy Wire, companies that proactively manage their certificate portfolios can reduce exposure to price volatility and better align with long-term decarbonization goals (source).

Measures for Emissions Reduction

Emissions can be reduced through technical and organizational approaches. Examples include:

Technical measures:

• Use of energy management systems to monitor consumption in real time.
• Modernizing heating and cooling systems for greater efficiency.
• Switching to energy-efficient lighting, such as LED systems.

Organizational approaches:

• Employee training to promote energy-saving behavior.
• Setting concrete energy-saving targets.
• Regular internal audits to review energy efficiency.

For instance, the European Commission recommends that companies invest in digital monitoring solutions and renewable energy sources to maximize both environmental and financial benefits (source).

Ensuring Compliance

In addition to cost control and emissions reduction, compliance with EU ETS 2 rules is essential. Thoughtful risk management helps avoid compliance issues. Key steps include:

• Implementing a clear documentation system to facilitate internal audits.
• Regular audits to review and improve emissions tracking.
• Early involvement of sustainability experts.

By integrating these approaches into your business strategy, you can not only reduce costs but also ensure all requirements are met.

Business Growth under EU ETS 2

Strengthening Market Position

Complying with EU ETS 2 requirements can help companies solidify their market position, enhance brand image, and improve access to sustainable financing sources. In fact, research from the European Investment Bank shows that companies with robust climate strategies are increasingly favored by investors and financial institutions, particularly as ESG (Environmental, Social, Governance) criteria gain prominence (source).

An internal CO₂ accounting system enables precise monitoring of emissions and transparent reporting to stakeholders. This transparency is key to convincing investors and partners of the company’s sustainable orientation. It also facilitates access to financing instruments linked to verifiable environmental performance.

New Business Opportunities

A stronger market position creates direct opportunities for growth and innovation. Investments in environmentally friendly technologies offer potential for new business areas. The EU framework for certifying CO₂ removals (CRCF) defines three key areas:

For example, the European Commission’s CRCF initiative encourages the development of innovative carbon removal solutions, opening up new revenue streams for companies that can demonstrate measurable and verifiable climate benefits (source).

ESG Strategy and Integration

To embed EU ETS 2 requirements into long-term business strategy, comprehensive integration into ESG goals (Environment, Social, and Governance) is needed.

A structured approach—combining strategic planning, involvement of sustainability experts, and regular reviews of goal achievement—ensures ESG integration is more than just a formality.

Focus on Quality Standards: The CRCF assesses CO₂ removals based on the “QU.A.L.ITY” criteria:

• Quantification: Results must be measurable.
• Additionality: Real added value must be demonstrated.
• Long-term storage: CO₂ must remain bound permanently.
• Sustainability: Measures must be implemented in an environmentally friendly way.

Working with certified providers and using transparent evaluation mechanisms are essential to meet these standards and successfully implement your ESG strategy.

German Market Requirements

German Compliance Regulations

In Germany, national regulations such as the Fuel Emissions Trading Act (BEHG) supplement the requirements of EU ETS 2. The BEHG provides the legal framework for national emissions trading and applies in parallel to EU regulations. Companies should familiarize themselves with these requirements to meet their obligations.

The price for emissions certificates follows a set price path:

The German Environment Agency monitors compliance and ensures companies properly fulfill their reporting and monitoring obligations.

German Documentation Standards

The 2022 Emissions Reporting Ordinance (EBeV 2022) defines clear requirements for the documentation of emissions. Companies must include the following core points in their reports:

• Total emissions for the calendar year
• Information on fuels placed on the market
• Measures to avoid double counting
• Information to prevent double charging

Reports must be submitted by 31 July of the following year at the latest. In addition, all relevant documents must be kept for at least ten years. These requirements often necessitate adjustments to internal company processes, as described in the next section.

German Business Practices

To meet legal requirements and documentation standards, companies must adapt their internal processes. The BEHG should be systematically integrated into business operations, with a reliable monitoring system covering both EU ETS 2 and German regulations.

Key steps include:

• Creating a monitoring plan for fuel emissions
• Establishing an internal control system to ensure data quality
• Training responsible employees
• Integrating emissions data into corporate reporting

These measures help companies efficiently implement legal requirements and align their processes accordingly.

Conclusion

The measures clearly show how companies can leverage EU ETS 2 for their benefit. Despite the challenges, it offers numerous opportunities for climate-friendly realignment.

Timely preparation is crucial. Companies should adapt their internal processes, implement a reliable monitoring system, and clearly define responsibilities. Investing in monitoring systems and training prevents unnecessary duplication of work.

In the German context, alignment with the BEHG is especially important. A well-thought-out compliance strategy helps leverage synergies and avoid inefficient processes.

Costs must also be kept in view: With certificate prices of €55.00 in 2025 and a price corridor of €55.00 to €65.00 in 2026, continuous adjustment of emissions strategies is necessary.

Accurate tracking and management of emissions data is key to successful implementation. Companies that act early will gain advantages in a market increasingly focused on climate protection.

FAQ

EU ETS 2 Basics

What is EU ETS 2?
EU ETS 2 is an “upstream system” for emissions trading aimed at companies that place fuels on the market, such as gas trading firms. It expands the existing EU Emissions Trading System by including additional sectors.

Who is affected?
Most companies already subject to the German Fuel Emissions Trading Act (BEHG) will also fall under EU ETS 2 and be required to report.

Preparation Steps

What deadlines must be observed?

What needs to be prepared specifically?
An emissions permit is required and can be submitted together with the monitoring plan. Data collection is based on the existing nEHS data structure to avoid duplicate work.

Consequences of Non-Compliance

What penalties apply?
Violations of EU ETS 2 regulations may result in significant fines. The details are governed by the TEHG-E, which was adopted by the federal cabinet on 9 October 2024.

German Climate Policy

How does EU ETS 2 relate to the German nEHS?
Between 2024 and 2026, both systems will run in parallel. Companies already participating in the national emissions trading system (nEHS) will gain insight into EU ETS 2 requirements during this transitional phase.

Available Support

How is reporting carried out?
Emissions reports must be submitted annually by 30 April for the previous year. Simplified rules apply for 2024, and verification is not required.

Which tools are available?
The existing nEHS infrastructure will be used for EU ETS 2 reporting. This ensures a smooth transition and reduces administrative effort for affected companies.