The EU ETS (European Union Emissions Trading System) covers emissions from sectors energy production, industrial activities, and aviation. In 2023, total emissions decreased by 15.5% mostly driven by reductions in emissions from power generation (they fell by 24%).
The EU ETS (European Union Emissions Trading System) covers emissions from sectors energy production, industrial activities, and aviation. In 2023, total emissions decreased by 15.5% mostly driven by reductions in emissions from power generation (they fell by 24%). Just like in 2022, Germany, Italy, and Poland were still the top emitters in 2023 - however, Italy and Poland exchanged their silver and bronze medals in the ranking compared to last year. Emissions this year fell due to energy markets disruptions, leading to decreased activity in industries reliant on gas, such as chemicals and fertilizers. Also, , the increase in renewables power generation contributed to the fall in CO2 in Europe this year. Finally, the macroeconomic slowdowns and reduced demand for products like cement and steel also contributed to lower emissions.
The sectors covered by the EU ETS (European Union Emissions Trading System) until 2024 include:
These sectors are subject to emissions allowances and are required to comply with emissions reduction targets set by the EU.
In addition to the sectors mentioned above, the maritime sector was included in the EU ETS coverage in 2024. Starting in January 2024, the EU ETS will encompass CO2 emissions from all large ships (with a gross tonnage of 5,000 and above) entering EU ports, irrespective of their flag.
The system addresses:
From 2027 onwards, a new emissions trading system (ETS 2) will be introduced, which will extend coverage to emissions from the building and road transportation sectors. Additionally, in 2026, there will be a regulatory and macroeconomic EU reassessment. This evaluation will determine whether international flights (departing from European countries to destinations outside of Europe) will be included in the coverage of the EU ETS.
In April 2024, we received data on the emissions levels of EU-covered sectors for the year 2023. The significant figures are as follows:
Emissions from electricity production saw a 24% decrease compared to 2022. Overall, there was a total decline in power generation across the EU by 2.3% in 2023. However, since there was a notable increase of wind, hydro, solar, and nuclear power (in that order), coal and gas usage was overshadowed. In turn, CO2 emissions decreased more than the rate of power generation fell. The more favorable climate conditions, also contributed to the decrease in emissions.
In industry sectors covered by the EU ETS, there was a reduction in emissions of approximately 7% compared to 2022. This reduction stems from a combination of reduced output and efficiency improvements, especially in cement, iron, and steel production. Indeed, following the pandemic and energy crisis, Europe's industrial activity has faced challenges. The annual average industrial production decreased by 2.4% in the euro area in 2023 compared with 2022.
Nearly half of the verified emissions originated from installations in Germany, Italy, and Poland. Specifically, they emitted respectively
In contrast, France emitted 67 129 474 tonnes in 2023.
In comparison, in 2022, Poland was the second-largest emitting country within the EU ETS coverage. Germany had still been the largest emitter at the time, and Italy ranking third.
Due to disruptions in gas markets, industries and power producers have reduced their emissions as a result of decreased activity. For instance, before the onset of the conflict in Ukraine in 2022, 2/3 of EU ammonia production relied on Russian gas. However, with the need to replace this cheap resource, they have turned to more expensive LNG resources imported from elsewhere. Many chemical and fertilizer companies were also affected by high gas prices and either suspended production entirely in 2022 or operated at reduced capacity. As a result, there was a 9% decrease in emissions from the chemicals sector, for example.
In 2023, a series of shocks disrupted the global macroeconomy. High inflation and interest rates, coupled with broader economic uncertainty, disrupted the sectors of the EU ETS. For instance, the production of clinker for cement (the third most emitting sector in 2023) and steel production (ranked fourth in 2023) faced a big reduction of demand for their products. This in turn lowered production levels - EU crude steel production decreased by 7.5% in 2023 compared to 2022 and by 17.5% compared to 2021. The production level in 2023 even fell below the volumes observed in the aftermath of the financial crisis in 2009. Similarly, in the cement sector, production decreased by 7%, accompanied by a 10% drop in CO2 emissions.
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