Allowances and registry account management in EU ETS 2

As in EU ETS 1, the new European emissions trading scheme for fuels EU ETS 2 centres on trading emission allowances via a central Union Registry. But how does this trading actually work? And what do obligated companies need to bear in mind with regard to registry accounts and the surrender of allowances?

Companies participating in the EU ETS 2 must purchase emission allowances for the emissions of the fuels they place on the market and surrender them annually.

One allowance entitles the holder to emit one tonne of CO₂ equivalent.

Characteristics of the allowances in the EU ETS 2:

• EU ETS 2 allowances are not identical to EUA (= EU Allowance) of EU ETS 1.
• They are not allocated free of charge, but are generally auctioned.
• As in EU ETS 1, the total quantity is limited annually (cap) and decreases over time.
• Certificates are freely tradable from 2027 and can be bought or sold.
• There are various price control mechanisms on the part of the EU, but the actual prices are difficult to predict - forecasts range from €50 to €340 per tonne of CO2 in 2030.

As in the existing EU ETS 1, emission allowances in EU ETS 2 will be managed via the central Union Registry, an electronic registry system operated by the European Commission and managed by the Member States. A separate registry account must be created for EU ETS 2; one cannot use the same account as for EU ETS 1.

Important functions of the registry:

• Management of certificate accounts of obligated companies
• Processing of transactions (purchase, sale, transfer)
• Surrender of allowances to cover emissions
• Overview of allowance holdings and movements

From 2028, companies must surrender the number of allowances each year that corresponds to their emissions reported (and verified) in the emissions report. The deadline for surrender is 31 May of the following year. The surrender takes place via the registry by cancelling the certificates from the account. If the deadline is not met, there is a risk of financial penalties and the obligation to make up for the surrender.

Registry account management and the handling of emission allowances form the technical backbone of the new EU ETS 2. Companies covered by the system should familiarise themselves with the application and management of accounts at an early stage. Only with a functioning account in the EU registry can the legally required surrender of allowances take place on time and in compliance with the law.

Would you like to improve your risk management in relation to emission allowances? Would you like support with registry account management and a fully customised procurement strategy for EU ETS 2 allowances that enables you to optimally manage risks due to volatile market prices? Consider our CO2 management package, with which we take over the registry account management for you and support you in risk management - professionally and cost-optimised.

Call us on +49 (0)30-398 8721-10 or send us an e-mail.