EU ETS2: What the Postponement Means for Carbon and Businesses
The European Union has agreed to postpone the rollout of ETS2, the expanded emissions trading scheme covering road transport and buildings, by one year—from 2027 to 2028. This decision follows months of lobbying by Poland and allied member states, who argued that the original timeline would place undue strain on households during periods of high inflation.
Polish leaders framed the outcome as a political win. Prime Minister Donald Tusk highlighted that “Europe listens to Poland”, while officials emphasised that the ETS2 revisions make the scheme more manageable for both consumers and industries.
Key Updates on ETS2
Who pays: ETS2 requires fuel suppliers to pay for CO₂ emissions, incentivising reductions in transport and buildings.
2040 climate target: The EU now aims for a 90% reduction in greenhouse gas emissions by 2040 (compared with 1990 levels). Flexibility allows the use of foreign carbon credits (up to 5–10%) and adjustments under economic or security pressures.
Industry concessions: Key sectors like steel and cement receive exemptions to limit the impact on consumers.
The EU is also implementing measures to stabilise ETS2 prices, ensuring carbon pricing remains credible without overburdening households and businesses:
Price ceiling reinforcement: A €45 price cap will be maintained, with the option to release up to 80 million additional allowances annually between 2027–2029 if the ceiling is breached.
Unused allowances reserved until 2030: Maintaining market balance and stability.
Early auctioning in 2026: Providing companies with more flexibility to hedge future costs.
European Investment Bank Frontloading Facility: Provides early funding for decarbonisation projects to help sectors covered by ETS2 adopt clean technologies faster.
Market Implications
BloombergNEF projects that under ETS2’s current structure:
Prices could reach €122/tCO₂ by 2030
Average €99/tCO₂ between 2027–2030
This would make ETS2 the most expensive carbon market in the world, potentially delivering a 40% reduction in emissions from transport and buildings compared to 2005 levels. However, it may also raise average fuel prices by up to one-third, driven by:
Inflexible supply-adjustment mechanisms
Insufficient complementary policy measures outside ETS2
Costly emission-reduction options
What This Means for Companies
Businesses operating in transport and building sectors can expect:
Higher compliance costs
Significant EUA price volatility linked to policy and market design changes
Urgent need to understand and plan for ETS2 obligations
Get in Touch
At Grey Epoch, we help organisations prepare for ETS2 by:
Procuring EU ETS II allowances (EUAs)
Building tailored compliance and trading strategies
Clarifying obligations so you can plan with confidence
ETS2 will be a cornerstone of Europe’s climate policy. Success will depend not just on regulation but on how companies anticipate, prepare, and adapt to the market.
