ETS 2 allowance prices could nearly double in the first 3 years

Allowances in the emissions trading system being introduced for buildings, road transport and small industry (EU ETS 2) could rise in price by more than 90% during the first three years after its planned launch in 2027. The international news website Montel reported this, citing an analysis by consultancy ClearBlue Markets.

The decision to expand the existing European Union Emissions Trading System (EU ETS), which covers, among other things, large combustion plants with a rated thermal input of more than 20 MWt, was made in 2023. The system is due to launch in 2027, with emissions monitoring and reporting to begin in 2025. The European Commission has set the maximum amount of CO2 emissions (the cap) that can be produced under the system in 2027 at around one billion tonnes.

An analysis by consultancy ClearBlue Markets found that, thanks to an initial oversupply in the market, EU ETS 2 allowances should start at around EUR 55/t. However, according to the analysis, the gradual reduction in the cap set for 2027 could push prices up to EUR 105/t around the turn of the 2020s and 2030s.

However, if the European Commission’s outlook for reducing CO2 emissions in the covered sectors is borne out, prices could be around EUR 70/t at the end of the decade.

For comparison, the price of the benchmark futures contract for emissions allowances (currently December 2024) in the EU ETS is now around EUR 67/t. According to ClearBlue Markets, it could rise to EUR 120 EURt by 2030.

Czechia has only partially transposed EU ETS 2 into national law

The Czech Republic delayed transposing the amendment to the EU ETS Directive into national law for a long time. Last Friday, MPs finally considered an amendment to the Emissions Trading Act in its third reading. It includes extending the obligation to pay for greenhouse gas emissions to the fossil-fuel-based local heating and road transport sectors. However, MPs have so far approved only the requirement for fossil fuel suppliers to monitor and report their emissions.

The government was supposed to transpose the entire directive, including the trading of new allowances, into national law by June this year. But it seems set to leave this unpopular measure to its successor. The Czech Republic faces penalties if it fails to adopt the full directive.