By Abbas Nazil
The European Commission has released its 2025 Carbon Market Report, showing the EU Emissions Trading System (EU ETS) continues to drive significant emissions reductions in the power sector and industry.
Data from 2024 indicate that emissions from power installations fell by nearly 11 percent compared to 2023, while overall emissions from fuel combustion in power and industry dropped by 9 percent.
EU ETS emissions from power and industrial installations are now approximately 50 percent below 2005 levels, placing the system on track to meet the 2030 target of a 62 percent reduction.
Renewable electricity production increased during the year, particularly from wind and solar, while gas increasingly replaced coal in power generation. The share of emissions from hard coal combustion reached a historic low in 2024.
Industrial emissions decreased slightly, with production levels largely stable, although sectors such as steel, fertilizers, and chemicals showed modest recovery in output.
The EU ETS also covers aviation emissions, including flights to Switzerland and the UK, with prices rising around 15 percent in 2024. Free allocation of allowances to aircraft operators continues to be gradually phased down, and airlines using sustainable aviation fuels receive additional allowance allocations.
For the first time, maritime transport CO₂ emissions were included in the EU ETS, covering 50 percent of emissions from voyages outside the European Economic Area and all emissions between EEA ports. Compliance has been high, with shipping companies meeting over 99 percent of surrendering requirements for 2024 by the September deadline.
The EU ETS raised €38.8 billion in 2024, bringing total revenue to over €250 billion since inception. Revenues are primarily used by Member States to support clean energy projects, including offshore wind, biogas, energy efficiency, public transport, and rail and cycling infrastructure.
Adjustments to the ETS cap will take effect in 2026, including rebasing, coverage expansion to maritime methane and nitrous oxide, and the exclusion of small emitters.
The report underscores the EU ETS’s role in incentivizing decarbonization, funding the clean transition, and ensuring the EU remains on track to meet climate targets while integrating emerging sectors.