The European Commission has adopted its annual report on the functioning of the European carbon market. Covering the year 2018, the report also presents certain initiatives proposed or agreed in 2019.
The report shows that in 2018, emissions from installations covered by the EU ETS decreased by 4.1%, or about 73 million tonnes CO2 equivalents, from 2017. As in previous years, the decrease was mainly driven by the power sector, while emissions from industry decreased only slightly. Verified emissions from aviation however continued to grow, increasing by 3.9%, or about 2.6 million tonnes CO2 equivalents, compared to 2017.
Concerning the surplus of allowances on the market, the 2019 Market Stability Reserve surplus indicator (1.65 billion allowances) continues to lead to placing allowances in the reserve, reducing the 2019 auction volume by nearly 40% (almost 400 million allowances).
In 2018, a strengthened carbon price signal led to a record amount of revenues for Member States from the selling of ETS allowances. The generated amount equalled some EUR 14 billion – more than doubling the revenues generated in 2017. Member States spent or planned to spend close to 70% of these revenues on advancing climate and energy objectives – well above the 50% required in the legislation.
Implementation work ahead of the start of phase 4 is in full swing. New implementing legislation on free allocation, the Innovation Fund, auctioning, monitoring, reporting, accreditation and verification (MRVA), and the Union Registry was adopted over the past year.
The issues covered by the report include:
- EU ETS infrastructure,
- Functioning of the carbon market (allowances put in and taken out of circulation, balancing supply and demand),
- Aviation,
- Market oversight,
- Monitoring, reporting and verification of emissions,
- Overview of administrative arrangements in Member States,
- Compliance and enforcement
New elements this year include information on the annual amounts of unallocated transitional free allocation auctioned or planned for auctioning by Member States, the yearly auction revenues generated by Member States for the period 2012-2018, and on the projects funded by financial instruments such as the InnovFin Energy Demonstration Projects with re-invested funds released from the NER300 programme.
The Commission will continue to monitor the carbon market and intends to adopt the next annual report in late 2020.
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