The EU ETS is a cornerstone of the EU’s policy to combat climate change and its key tool for reducing greenhouse gas emissions cost-effectively. It is the world’s biggest carbon market.
Directive (EU) 2018/410 amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments. The revised EU ETS Directive entered into force on 8 April 2018 and sets the framework for the fourth trading period from 2021 to 2030.
On 14 July 2021, the European Commission proposed the revision of the EU ETS Directive under the “Fit for 55” package of legislative proposals, in view to achieve climate neutrality in the EU by 2050, including the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030.
In addition, the “Fit for 55” package introduced a separate emissions trading system (referred to as ETS II) for the buildings, road transport and additional fuels sectors. ETS II is set to become operational from 2027, with the aim of further extending carbon pricing across the economy and supporting the EU’s decarbonisation goals. Revenues from ETS II will help fund the Social Climate Fund, supporting vulnerable households and micro-enterprises during the energy transition.