EU ETS 2: European emissions trading for fuels
The new EU-ETS 2 (European Union Emissions Trading System 2) is just around the corner. The amendment to the Greenhouse Gas Emissions Trading Act (TEHG) to implement the corresponding EU directives came into force at the beginning of March 2025, meaning that the past year 2024 is already covered by the new reporting obligations. Obligated companies are urgently advised to prepare quickly for the new CO2 trading and levy system.
- The new EU ETS 2 emissions trading scheme for fuels is similar to EU ETS 1, which has been in place since 2005, but will become an independent system with its own CO2 allowances.
- In contrast to EU ETS 1, where the obligation to surrender emissions lies with the greenhouse gas emitter, EU ETS 2 takes an upstream approach: primarily the distributors of fuels used in heat generation and transport are affected.
- Almost all companies affected by the national emissions trading scheme (nEHS) will also be affected by EU ETS 2 in future.
- The nEHS and EU ETS 2 will run in parallel until the end of 2027. Companies affected must therefore report in both systems.
- Companies affected must submit an application for an emissions permit and a monitoring plan in accordance with EU ETS 2 to the German Emissions Trading Authority (DEHSt) by 30 June 2025, as announced by DEHSt on 27 February 2025*.
- DEHSt has not yet announced the deadline for submitting the first emissions report under EU ETS 2. It has been announced for summer/autumn 2025.
- CO2 allowances can be purchased from 2027 and must be surrendered annually from 2028. Until then, the nEZ surrender obligation in the nEHS will continue to apply.
- Independent verification of the EU ETS 2 emissions report is required from the second reporting year.
German government has finally delivered
The German Federal Government should have ratified EU Directives (EU) 2023/958 and (EU) 2023/959 on the introduction of the EU ETS 2 by 31 December 2023, which did not happen by the end of 2024. As a result, three infringement proceedings are already pending against Germany vis-à-vis the EU.
The corresponding amendment to the Greenhouse Gas Emissions Trading Act (TEHG) was finally passed by the Bundestag on 27 February 2025. On the same day, DEHSt announced the deadlines for submitting a monitoring plan and applying for an emissions permit for EU ETS 2. Both are due by 30 June 2025.
Companies that are already affected by the national emissions trading system (nEHS) must generally fulfil both the previous reporting and submission obligations and the new reporting obligations under EU ETS 2 in parallel. The nEHS is expected to be almost completely replaced by the EU ETS 2 by the end of 2027.
It is unclear whether the European Commission will grant the German government's request to transfer the agriculture, forestry and rail transport sectors from the nEHS to the EU ETS 2. These sectors will remain unaffected by EU ETS 2 until one year after this authorisation is granted. German thermal waste treatment plants, which the German government wants to transfer to EU ETS 1 in the future, are also exempt from EU ETS 2.
The European Commission will review by July 2026 whether and how these plants should be integrated into EU ETS 1 from 2028. Until then, thermal waste treatment plants will continue to be subject exclusively to the national emissions trading scheme nEHS. In addition, the incineration of municipal waste in plants with a rated thermal input > 20 MW is expected to be subject to the reporting obligation in EU ETS 1 from the 2024 reporting year as part of the amendment to the TEHG.
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