EU ETS – Emissions Trading System

What are EUAs?

EU Allowances (EUAs) are a type of carbon allowance that allows companies covered by the EU ETS to emit a certain amount of CO2e. EUAs can be bought and sold on the market, and the variable market price of EUAs reflects the cost of reducing emissions.

Principles for acquiring EUAs

  • Determine your needs: Before buying EUAs, it is important to consider the amount of GHG emissions your company will be responsible for in the coming year and how many allowances will be needed to offset those emissions.
  • Research the market: It is important to familiarize yourself with the current market price for EUAs and the different options available for buying them. This will help you determine the best strategy for acquiring the necessary allowances.
  • Choose a purchasing method: EUAs for shipping can be acquired in several ways including through auctions in the primary market, or trading in the secondary market. Choose the method that best meets your needs and budget.

It is important for companies covered by the EU ETS to carefully manage their EUA holdings in order to meet their emissions limits and minimize the cost of reducing emissions.

How to purchase EUAs?

  • Auctions - EUAs can be purchased at a fixed price at auctions arranged several times a year by the European Energy Exchange (EEX) on behalf of the EU. Companies need to register with the European Commission to participate in these auctions.
  • Trading - EUAs can be bought and sold on the secondary market through brokers or online trading platforms. These can be traded on various exchanges and over-the-counter (OTC) markets, and the price fluctuates according to supply and demand. 
  • Futures - It is possible to bank EUAs for use in future years. This can be useful if you expect to have higher emissions in the future and want to ensure you have sufficient allowances to offset those emissions. EUAs dated 1 January 2013 or later remain valid for meeting future surrender obligations, and EUAs issued on or after this date do not expire until they are surrendered.

The amount of EUAs issued decrease annually by a linear reduction factor in excess of 4% p.a.. The EUAs are made available on the market through weekly auctions and through free allocation to certain sectors. Shipping is not granted free allocations and has been given a phase-in approach instead.

The EU regulates the availability of allowances, and during periods with large amounts (the current threshold is 833 milllion) of EUAs in circulation, the volume made available through auctions are reduced and the EUAs are put into a market stability reserve (MSR). Similarly, when there is a shortage of EUAs, more can be released from the MSR to ensure a stable price. Over time the total amount of emissions will stay below the EU’s target regardless through the total amount of EUAs issued. As of 2022, there were about 1.4 billion EUAs in circulation. The verified emissions for 2021 were 1.3 billion tonnes CO2. 

The introduction of the EU ETS for shipping will mean an additional 80 million EUAs will be put on the market in 2024. Of these, auction revenues from about 20 million allowances will go to the Innovation Fund to be used for shipping specific projects and the remaining revenues to EU and EEA member states. 

How can we help you?

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