Greenhouse Gas Emissions Halved Over Two Decades in Europe

The implementation of emissions trading in the European Union (EU) has led to a significant reduction in greenhouse gas emissions over the past 20 years. According to the Federal Environment Agency (UBA), emissions in the EU Emissions Trading System (ETS) have decreased by 51% since its introduction, with Germany seeing a reduction of approximately 47%.

The emissions trading system was established to incentivize companies to reduce their greenhouse gas emissions by requiring them to purchase certificates for their emissions. This economic approach to climate protection has proven effective, although not all sectors are currently included in the scheme.

Under the emissions trading framework, businesses must demonstrate their rights to emit greenhouse gases and can trade these rights among themselves. As time progresses, the number of available certificates decreases, which has implications for emissions management across the 27 EU member states, as well as Norway, Iceland, and Liechtenstein. Approximately 9,000 facilities within the energy sector and energy-intensive industries are monitored under this system, accounting for around 40% of greenhouse gas emissions in Europe.

Starting in 2027, the new phase of the emissions trading system (ETS2) will expand to include fuels, which will notably affect the transportation and building sectors. This expansion is expected to increase the cost of heating buildings with fossil fuels and the price of gasoline and diesel. As the number of certificates issued becomes limited, market pressure on prices is anticipated to rise. Daniel Klingenfeld from the UBA indicated that this could lead to significantly higher costs, potentially reaching three-digit prices per ton of CO2, although this is not an official forecast but rather a conclusion drawn from existing studies. To mitigate the impact on consumers, the government will need to implement compensatory measures, as rising CO2 prices will also generate increased revenue for the state.

Currently, the state-mandated price for emitting a ton of carbon dioxide stands at EUR55. In addition to the EU system, Germany operates a national emissions trading scheme, and together, these mechanisms cover approximately 85% of the country's emissions. In 2024, the 1,716 facilities monitored under the EU emissions trading system in Germany emitted around 273 million tons of carbon dioxide equivalents. This figure represents a 5.5% decrease compared to the previous year. Overall, Germany's total greenhouse gas emissions saw a reduction of 3.4%, as reported by the UBA earlier this year.