EU-ETS and ETS-2 trading systems in brief
The EU-ETS (Emission Trade System) and ETS-2 are both European trading systems for CO2 emissions that operate in much the same way but function separately. This is because these systems target different sectors. The EU-ETS, also known as ETS-1, is aimed at stationary industrial installations, aviation, and maritime shipping. Companies in these sectors must purchase emission allowances and report their annual CO2 emissions. ETS-2, which will start in 2027, is specifically designed for fuel suppliers and covers the CO2 emissions resulting from fuels used in the construction, transport, and other sectors. While the EU-ETS focuses on the largest polluters, ETS-2 expands the emissions trading system to include smaller but numerous sources of CO2 emissions. Moreover, emission allowances from ETS-1 cannot be transferred to ETS-2, resulting in two separate markets for emission allowances. This expansion is intended to achieve broader coverage of emission reduction in the EU and support the climate objectives of the European Green Deal.
Participation Criteria ETS-2
Fuel suppliers are given additional obligations under ETS-2. The CO2 emissions from their supplied fuels must be monitored, followed by reporting, and ultimately the surrendering of emission allowances. To determine whether your company is required to participate in ETS-2, you need to assess the following three points within your company:
- Are you a regulated entity as a fuel supplier? In short, this means that your company is liable for excise duties on mineral oils or pays energy tax on coal or gas.
- To which sectors is the fuel supplied for end use? Currently, the ETS-2 sectors are: building, road transport, energy industries, manufacturing and processing industry, and construction sector.
- Does your company supply one or more of the following fuels: petrol, gas oil, kerosene, LPG, natural gas, heavy fuel oil, coal, coke, butane, or propane?
If your company meets all three of the above points, the obligation to participate in ETS-2 applies. There is no threshold value concerning ETS-2; regardless of the amount of fuel supplied or CO2 emissions, the above criteria are decisive. For the receiving party, ETS-2 does not impose any obligations. If your company meets two or fewer points, there is currently no obligation. It is wise to keep an eye on changes. There are plans to introduce ETS-2 more broadly, which may mean that currently exempted sectors such as agriculture and forestry, fisheries, shipping, and rail may no longer remain exempt.
Permit Application ETS-2
Although the ETS-2 will come into effect in 2027, the obligation to monitor emissions will already start next year. To achieve this, a permit must be applied for from the NEa (Dutch Emissions Authority) before November 1, 2024; this should be possible from mid-August. From January 1, 2025, the permit requirement will start, and the NEa will monitor whether a permit application has been submitted by this date, but they will not yet enforce it. From 2025, permitted companies must report their CO2 emissions annually on April 30, relating to the consumption of the supplied fuels.
To obtain a permit, a monitoring plan (MP) is required. This must describe how the emissions from the supplied fuels are determined.
As a company, prepare yourself well in advance and make sure you have a valid Chamber of Commerce (KvK) number with the correct B.V. and address details registered. For the permit application, you will also need eHerkenning with reliability level EH3. With this, you can log in to the EHP (Emission Trading Platform of the NEa) from mid-August 2024, where the monitoring plan can be completed and the permit application can be submitted. The available allowances will be auctioned from 2027 onwards.
