The European Commission’s newly adopted 2025 Carbon Market Report shows that the EU Emissions Trading System (EU ETS) continued to exert downward pressure on emissions in 2024
Integrated into the broader State of the Energy Union assessment, the Carbon Market Report provides a detailed overview of EU ETS performance in 2024 and developments in the first half of 2025, confirming that the system remains effective and well-functioning.
The power sector sees a significant decline in emissions
The Carbon Market Report shows that emissions from power and industry installations covered by the EU ETS are now approximately 50% below 2005 levels, keeping the system on track to meet the 2030 target of a 62% reduction.
The power sector accounted for a large share of the decline, with emissions falling nearly 11% compared with 2023. Total emissions from fuel combustion across both power and industrial installations dropped by 9%.
The continued expansion of renewable electricity production, particularly wind and solar, played a significant role in this trend.
Gas also maintained its position as a transitional fuel by displacing more carbon-intensive coal in electricity generation. As a result, emissions from hard coal combustion within the EU ETS reached a historic low in 2024.
Industrial emissions are stable but vary by sector
Industrial emissions decreased slightly overall in 2024. Total industrial output remained mainly stable but revealed sector-specific differences. Some industries, including steel, fertilisers, and chemicals, experienced modest output volume recoveries. These variations contributed to a mixed but generally downward trajectory in emissions intensity.
The aviation sector experiences rising emissions.
The EU ETS continued to apply the polluter-pays principle to aviation emissions within Europe, as well as flights departing to Switzerland and the United Kingdom.
Emissions covered under the system grew by around 15% compared with 2023. Roughly half of this increase came from rising aviation activity, while the rest resulted from the inclusion of tourist flights to the EU’s outermost regions.
To support the decarbonisation of air travel, the phasing out of free allowances for the aviation sector continued in 2024. The system also began rewarding the use of sustainable aviation fuels through additional allowances. It introduced monitoring and reporting requirements for non-CO₂ aviation effects, making the EU the first jurisdiction to do so.
Maritime transport integrated into the EU ETS
2024 was the first inclusion of CO₂ emissions from maritime transport in the EU ETS. The system now covers half of the emissions from voyages involving ports outside the European Economic Area, all emissions from voyages between EEA ports, and emissions occurring while ships are docked in EEA ports.
Compliance was particularly high, with shipping companies surrendering allowances for more than 99% of required emissions by the September 2025 deadline. Mechanisms were also introduced to ensure environmental integrity when fewer allowances are surrendered relative to verified emissions.
Substantial revenues accelerated the clean transition
EU ETS revenues remained a crucial driver of clean-energy investment, generating €38.8 billion in 2024 and bringing total lifetime revenue to more than €250 billion.
Funds supported national and EU-wide programmes, including renewable energy expansion, efficiency upgrades, public transport improvements, and significant infrastructure projects. Member States continued to direct revenues toward sectors central to the energy transition, such as grid development, heating and cooling, and sustainable mobility.
The Carbon Market Report outlines several adjustments to take effect in 2026. These include a one-off rebasing of the emissions cap, expansion of coverage to maritime methane and nitrous oxide emissions, and reductions tied to the exclusion of updated small-emitter categories.
