A separate ETS starting in 2027 for fuels used in road transport, buildings, and smaller industries.

They cover different sectors, use separate allowances, with different supply and demand mechanics. Although also a cap-and-trade system, it works Fastly different from the original ETS.

The following fuel suppliers are regulated under the EU ETS 2:

1. Authorised keepers of tax warehouses liable for excise duty, mainly covering liquid transport fuels.

2. If this does not apply, any person liable for excise duty on natural gas or solid fuels — including those exempt from paying (e.g. household coal suppliers) who must still register with national authorities.

3. If neither applies, Member States may designate another responsible party, for example where multiple persons are jointly liable for the same excise duty or where national systems require a different point of obligation

• End consumers are in scope when fuel is released for consumption by an ETS2-regulated supplier and the activity is not already covered by ETS1. Coverage is based on Common Reporting Format (CRF) categories from the IPCC 2006 Guidelines:

• Buildings – CRF 1A4a (commercial/institutional) & CRF 1A4b (residential): space/water heating, cooking, small equipment and off-road tools used in these settings.

• Road transport – CRF 1A3b: cars, motorcycles, vans, lorries, buses.

• Energy industries not in ETS1 – CRF 1A1: small power/heat plants, refineries/coke ovens and other combustion where the installation is outside ETS1.

• Manufacturing & construction not in ETS1 – CRF 1A2: on-site combustion for heat/electricity and mobile/off-road machinery, plus head-office energy use for these firms.

Member-State opt-ins – Article 30j: any additional sectors a country adds to ETS2.

The ETS 2 will have a soft price cap of €45 (inflation adjusted) per tonne of CO₂. If the average allowance price exceed this level for a predefined amount of time, additional allowances can be released from the Market Stability Reserve. The mechanism will be reviewed in 2030.

The €45 trigger is inflation-linked at 2020 prices. When the EU ETS starts, this means the cap might already exceed €55. Further changes may be reviewed periodically by EU regulators as part of ETS 2 updates.

The annual compliance cycle is as follows:

• Jan-Dec: Monitor emissions.

• April 30th: From 2026 - submit verified annual emissions report for previous year’s emissions.

• April 30th: From 2028 – report on average share of carbon costs passed on to consumers in the previous year.

• May 31st: From 2028 - surrender allowances for previous year’s emissions.

• July 31st: Submit possible improvements to Monitoring Plan (deadline extension to September possible).

Yes, certified biofuels may reduce or remove the obligation to surrender allowances.

• In Scope – Biofuels, including biodiesel, fall under ETS 2 because they are supplied for use as motor or heating fuels, even though they are derived from biological sources.

• Zero-Rating – When a biofuel meets the sustainability and greenhouse gas savings criteria set out in the Renewable Energy Directive (RED II), its emissions are treated as zero, meaning no allowances need to be surrendered.

• Proof Required – To qualify for zero-rating, operators must provide documented evidence that the fuel complies with RED II sustainability standards.

The ETS 2 scheme itself starts in 2027, so primary compliance purchases aren’t yet possible. However, for those comfortable with derivatives, futures contracts are already available on exchanges, allowing early market exposure and hedging ahead of the scheme’s launch.

No — the two systems will have separate allowances.