Current Developments

The Emissions Trading Directive (Directive 2003/87/EC) was revised as part of the “Fit-for-55” package and adopted by the Council on 19 April 2023. The following major adjustments were made to the EU Emissions Trading System (EU-ETS):

Industry and Energy Sector (“ETS-1”)

The total quantity of allowances will be reduced by 62 percent by 2030 compared to 2005. The annual reduction path is 4.3 percent from 2024 and will be increased to 4.4 percent from 2028.

From 2024, the scope for stationary installations will be expanded, with adjustments made for the following activities: oil refining, production of iron or steel, production of primary aluminium or aluminium oxide, drying or calcination of gypsum, production of industrial carbon black, production of hydrogen (H2) and synthesis gas, and the transport of greenhouse gases for geological storage. Installations thus included in the EU-ETS will be subject to the provisions of the Emissions Trading Act 2011 (EZG 2011) from 1 January 2024.

Furthermore, the annual deadlines will also be adjusted from 2024 as follows:

• Submission of emissions report by 31 March

• Booking of transitional free allocation by 30 June

• Surrender of allowances for the previous year’s emissions by 30 September

Changes from 2026

To combat “carbon leakage,” the existing system of transitional free allocation will generally be maintained, supplemented by a carbon border adjustment (CBAM) for some sectors, such as the iron and steel industry, cement industry, fertilizer production, aluminium production, hydrogen production, and electricity generation. For these sectors, free allocation will be reduced starting in 2026 and phased out entirely by 2034.

Product-specific benchmarks will be adjusted in line with technological developments for the period 2026–2030, with existing minimum and maximum thresholds for annual improvement increased to 0.3 percent and 2.5 percent per year, respectively.

In addition, a bonus/malus system will be introduced for the calculation of transitional free allocation for 2026–2030, with details set out in Delegated Regulation (EU) 2019/331 (allocation rules, FAR-VO).

• For installations that do not implement recommendations from energy audits or energy management systems under Article 8 of the Energy Efficiency Directive (2012/27/EU), the free allocation will be reduced by 20 percent. This applies only to recommendations with a payback period of no more than three years and proportionate investment costs. Alternative measures may also be considered. If measures are implemented retroactively within the period, the 20 percent reduction will be reversed.

• For installations with plant parts with a product reference value, whose individual emission factor is among the top 20 percent of reference values in the relevant sector, a 20 percent reduction of allocation applies unless a climate neutrality plan is submitted by 1 May 2024. This plan must include clear targets for five-year periods and align with EU climate neutrality 2050.

• Installations with individual emission factors among the lowest 10 percent in the sector are exempt from any future cross-sectoral correction factor.

Maritime Transport

CO₂ emissions from maritime transport account for approximately 3–4 percent of Union emissions. These emissions will be included in the EU-ETS for the first time. Ship operators’ obligation to surrender allowances will be phased in: 40 percent for verified emissions from 2024, 70 percent from 2025, and 100 percent from 2026.

Most large ships (gross tonnage over 5,000) will fall under the EU-ETS from the outset, while other large ships, especially offshore vessels, will initially remain under Regulation (EU) 2015/757 (MRV shipping) on monitoring, reporting, and verification of CO₂ emissions from maritime transport, and only later fall under the EU-ETS. Non-CO₂ emissions (methane and N2O) will be included under MRV shipping from 2024 and under EU-ETS from 2026.

Aviation

Free emission allowances for the aviation sector will be gradually phased out. From 2024, the number of free allowances will be reduced by 25 percent, in 2025 by 50 percent, and from 2026 all allowances will be auctioned. Up to 20 million allowances will be reserved until 31 December 2030 to incentivize aircraft operators to switch from fossil fuels. Upon request, allowances may cover the cost difference between sustainable aviation fuels (SAF) and kerosene.

The EU-ETS will apply to intra-European flights (including flights to the UK and Switzerland), while CORSIA will apply from 2022 to 2027 for extra-European flights to and from participating third countries (“clean split” principle).

Transparency regarding emissions by aircraft operators will be improved, and a framework for monitoring, reporting, and verification of non-CO₂ aviation effects will be established. By 1 January 2028, the Commission may propose measures to reduce non-CO₂ aviation effects based on the results of this framework.

To comply with the International Civil Aviation Organization (ICAO) CORSIA, monitoring of international emissions and the obligation to surrender credits at the end of each CORSIA compliance period is required. For the 2021–2023 period, credits must be cancelled by 31 January 2025; for 2024–2026, by 31 January 2028.

Buildings, Road Transport, and Other Sectors (“ETS-2”)

The EU Emissions Trading System will be extended to a second trading system (ETS-2), treated separately from ETS-1 at least until 2030. This new system covers CO₂ emissions from the placing of fuels on the market by “supervised entities” (mainly fuel suppliers to end consumers) for combustion in the building and road transport sectors, as well as additional sectors (commercial production).

The target path starts in 2024 and will decrease annually by 5.1 percent for 2025–2027. From 2028, the linear reduction path will be recalibrated, raising the annual reduction factor to 5.38 percent.

All allowances will be issued via auctions, with 30 percent more certificates to be released in 2027, deducted from auction volumes 2029–2031 (“front loading”). Additionally, 600 million allowances will be placed in the Market Stability Reserve in 2027 to stabilize prices.

From 2025, regulated entities must monitor their attributed emissions, and from 2026 report to the competent authority; emissions for 2024 must be reported by 30 April 2025.

From 2028, regulated entities must surrender allowances for previous-year emissions annually by 31 May. If energy prices exceed a defined threshold, the trading start will be postponed by one year.

Further Steps

At the EU level, several delegated and implementing acts have recently been revised, with others currently under review or development to define implementation details. Numerous guidance documents provide additional implementation details: Current Guidance Documents (→ europa.eu).

National Legal Implementation

The national administrative framework was established through an amendment of the Emissions Trading Act 2011 (EZG 2011), published with BGBl. I No. 196/2023 (→ RIS) on 31 December 2023.

Allocation of Emission Allowances 2026–2030

The process for applying for free allocation remains largely unchanged. Exact rules are set out in the FAR-VO. Following the ETS directive amendment, these allocation rules were updated and adopted by the Commission on 30 January 2024, starting a two-month scrutiny period by the EU Parliament and Council. After this period, the new allocation rules will take effect.

Key changes to allocation rules include:

• Adjustments to the Carbon Border Adjustment Mechanism (CBAM)

• Eligibility for heat from electricity

• Removal of deductions for indirect emissions in product benchmarks where fuel and electricity are interchangeable

• Removal of rules for electricity generators, including the linear factor

• Changes to system boundaries for product benchmarks, for example iron ore, liquid pig iron, cement clinker, tissue paper, hydrogen

• Use of the median instead of the mean for historical activity rates

• Adjustments for heat recovery in plant parts with fuel benchmark or process emissions

• Change of value for calculating provisional annual free allocations for process emissions (reduced from 0.97 to 0.91 from 2028)

• Removal of the 95 percent de minimis rule for product/PRODCOM allocations for carbon leakage status

For installations with parts whose greenhouse gas emission values are below the average of the most efficient 10 percent and account for more than 60 percent of the provisional annual allocation, no cross-sector correction factor applies.

• 20 percent of free allocation is linked to implementing energy audit/energy management system recommendations (with exceptions)

• 20 percent of free allocation is linked to preparing a climate neutrality plan for installations above the 80th percentile of product benchmark emissions in 2016–2017. Plant parts accounting for ≤20 percent of provisional allocation are excluded.

Applications for transitional free allocation for 2026–2030 can be submitted until 30 May 2024. More details are available under “Allocation of Emission Allowances 2026–2030.”

Electricity Cost Compensation

To reduce the burden on companies heavily affected by increased electricity prices in 2022 due to indirect CO₂ costs, the Electricity Cost Compensation Act 2022 was enacted. Federal funds of up to 75 percent of 2021 auction revenues were made available for affected companies.

Applications from 44 companies with 76 installations across 27 sectors were approved. The total approved and paid funding amounted to Euro 184,780,600.74.

The report on the Electricity Cost Compensation Act 2022 (in German only) under Article 10a(6) of the EU Emissions Trading Directive 2003/87/EC provides an overview of fund use. Annex II is not published for data protection reasons.

Annex I, information on grants over Euro 500,000, is available on the Austria Wirtschaftsservice GmbH website, the implementing agency of this support.