The European Commission adopted today the 2025 Carbon Market Report, presenting an effective and well-functioning EU Emissions Trading System (EU ETS). As part of the broader State of the Energy Union Report, the Carbon Market Report takes stock of the functioning of the EU ETS in 2024 and highlights relevant developments in the first half of 2025. It shows how emissions in the power sector and industry continue in the declining trend. EU ETS emissions from power and industry installations are around 50% below 2005 levels and the EU ETS is on track to achieve the 2030 target of -62% emissions.
In 2024, emissions from installations in the power sector fell by nearly 11% compared to 2023 (overall emissions from combustion of fuels, from both power and industry, fell by 9%). Renewable electricity production continued to increase (primarily in terms of wind and solar electricity) and gas continued to replace coal in power generation. The share of emissions in the EU ETS from hard coal combustion reached a historical low in 2024.
Emissions from industrial installations decreased slightly. Overall industrial production remained largely at the same level, but with differences between sectors, including a modest recovery in output volumes in some sectors such as steel, fertilisers and chemicals.
In line with the ‘polluter pays’ principle, the EU ETS prices intra-European aviation emissions and departing flights to Switzerland and the UK. These increased in 2024 by around 15% above 2023 levels. Around half of the increase reflects the continued growth of emissions in the sector, and the other part is due to coverage of tourist flights to the EU’s outermost regions. To further tackle emissions from aviation, free allocation of emission allowances to aircraft operators continued to be gradually phased down. The EU ETS also started rewarding airlines for their use of sustainable aviation fuels (SAF) through additional allowance allocation, and the EU became the first jurisdiction to introduce monitoring and reporting of non-CO2 aviation effects.
2024 was also the first year that CO2 emissions from maritime transport were included in the EU ETS. The system now covers 50% of emissions from voyages departing or arriving outside of the European Economic Area (EEA), and all emissions between two EEA ports and when ships are at an EEA port. Compliance was high, showing how the start of EU ETS for maritime ran smoothly, with shipping companies surrendering allowances for more than 99% of their relevant surrendering requirements by the 30 September deadline. In 2025, shipping companies surrendered allowances for 40% of their 2024 emissions. In addition, shipping companies may surrender 5% fewer allowances than their verified emission from ice-class ships. To protect the environmental integrity of the system, when fewer allowances are surrendered compared to the verified emissions from maritime transport in 2024 and 2025, Member States will cancel from auctioning the number of allowances corresponding to that difference.
EU ETS revenue has remained an important source of funding for the clean transition, with €38.8 billion raised in 2024. The revenues are distributed primarily to Member States to tackle climate change, progress on the clean transition and invest in clean and innovative energy technologies, as well as to the Innovation Fund, the Modernisation Fund and the Resilience and Recovery Facility for the REPowerEU plan. Total revenue raised by the EU ETS to date exceeds €250 billion.
Member States have largely used their 2024 ETS revenues to support projects in energy supply – renewables, grids and storage, energy efficiency, heating and cooling in building and public transport and mobility. Examples include support to offshore wind and biogas upgrades in Denmark, deep retrofit projects in residential buildings in Lithuania, expansion of public transport in Portugal, and investments in rail transport and cycle paths in Slovenia. An overview of Member States’ reporting on the use of their ETS revenue can be found in the EU Climate Action Progress Report.
The Carbon Market Report also explains adjustments to the ETS cap taking effect in 2026: rebasing (one-off reduction), expansion to methane and nitrous oxide from maritime transport, and reduction based on the updated list of small emitters being excluded from the EU ETS.
