The Emissions Trading System of the European Union (EU ETS) reports that the greenhouse gas emissions from sectors covered by the system have been reduced by 50% since its launch in 2005. Around 45% of the European Union’s output of greenhouse gases is regulated by the EU ETS.
New data from the European Commission shows that the reduction in 2024 was partly driven by the inclusion of the maritime sector. This achievement indicates the EU is on track to meet its 2030 climate goals.
What is the EU ETS?
The EU Emissions Trading System (EU ETS) was the world’s first major carbon market and is the cornerstone of Europe’s climate policy. The system is based on a “cap and trade” principle. Major polluters—such as power plants, industrial installations, and airlines—are subject to an overall carbon emissions cap set by the EU. Within this cap, companies receive or buy emissions allowances (EUAs). Companies that emit less than their allowance can sell the surplus; those that exceed their limit must buy additional allowances or face penalties.
Because the cap decreases every year, total emissions of greenhouse gasses decline gradually. This should encourage investment in cleaner technologies and reduce pollution.
Emissions cut in half
According to a recent statement from the European Commission, total emissions from sectors under the EU ETS fell by another 5% in 2024 compared to the previous year. This brings the cumulative reduction since 2005 to exactly 50%. A significant part of the 2024 drop came from the power sector, which saw a 12% decrease in emissions. The continued growth of renewable energy—particularly solar and wind—and a decline in coal usage were key drivers.
In an recent interview with Columbia business school with Professor Gernot Wagner, Wopke Hoekstra, European Commissioner for Climate Action said : By now it’s clear that the ETS is “the smartest policy tool we have in the EU full stop“ And indeed the system drives investments into clean technologies and puts a real price on pollution. It keeps us on track toward climate neutrality.
Aviation emissions covered by the EU ETS rose compared to 2023 by around 15%, in part due to the broadening of geographical coverage, the inclusion of non-domestic flights.
Maritime sector
Another major development is the inclusion of the maritime sector, effective from January 1, 2024. Large ships over 5,000 gross tonnage calling at EU ports must now monitor and report their carbon gas emissions. Starting in 2025, they will also need to surrender emissions allowances. Initially they should covering 40% of 2024 emissions, increasing to 100% by 2027.
In 2024 alone, shipping companies reported 72 million tonnes of carbon gas emissions, of which approximately 40 million tonnes are already recorded in the emissions registry. Adding this sector should make the ETS more effective and equitable, by bringing a significant polluter into the scope of carbon pricing.
According to the Commission, including the shipping industry will help meet the updated target of reducing ETS sector emissions by 62% by 2030 compared to 2005 levels.
On track for 2030
With emissions halved in just two decades, the EU sees the ETS as an important policy instrument for the decarbonisation of the European economy. The latest figures inspire confidence that the EU’s goals: 55% total emissions reduction by 2030 and net-zero emissions by 2050—are within reach.
At the same time, experts stress that stronger efforts are still needed. Carbon prices must remain high enough to drive behavioral change, and the ETS must continue adapting to new sectors and challenges.
But for now, there is reason for optimism. Especially since the Commission stands by its ETS regulation given recent questions on possible exceptions for the European steel sector to support the defense industry. Commissioner Wopke Hoekstra: “The commission has no plans to suspend the ETS”