REGULATION news
New EU ETS rules took effect from January 2026
After a two-year phase-in, maritime transport is now facing full compliance under the EU ETS, alongside an expanded scope covering additional greenhouse gases and a tighter emissions cap.
These changes reinforce the EU’s climate ambition while significantly raising the stakes for affected sectors.
EU ETS performance and
2025 Carbon Market Report The 2025 Carbon Market Report, published by the European Commission in December, shows that the EU Emissions Trading System (EU ETS) continued to drive significant emissions reductions in the power and industrial sectors throughout 2024. The system has played a key role in incentivizing decarbonization while generating substantial revenues to support investment in the clean energy transition.
The EU ETS is a cornerstone of the EU’s climate policy. Built on the “polluter pays” principle, it places a cap and a price on emissions from the energy, industrial and maritime transport sectors, as well as parts of the aviation sector. Emissions covered by the EU ETS represent approximately 40% of the EU’s total greenhouse gas emissions.
Emissions reductions and
progress towards 2030 targets According to the report, emissions from power and industrial installations covered by the EU ETS are now around 50% below 2005 levels. The system remains on track to achieve its 2030 emissions reduction target of –62%.
Notably, 2024 marked the first year that CO₂ emissions from maritime transport were included in the EU ETS, representing a major expansion of the system’s scope.
Maritime transport
coverage and compliance The EU ETS now covers: - 100% of emissions from voyages between two ports within the European Economic Area (EEA) and emissions generated while ships are at an EEA port; and
- 50% of emissions from voyages departing from or arriving at ports outside the EEA.
Compliance in the first year was high. By the 30 September deadline, shipping companies surrendered allowances covering more than 99% of their required emissions, demonstrating a smooth introduction of the maritime component of the EU ETS.
In 2025, shipping companies were required to surrender 56 | ISSUE 115 | MAR 2026 | THE REPORT
allowances for 40% of their verified 2024 emissions, with a permitted 5% reduction for ice-class ships. To safeguard the environmental integrity of the system, any shortfall between verified emissions and surrendered allowances for 2024 and 2025 will be cancelled by Member States from future auction volumes.
Greenhouse gases
covered under the EU ETS Beyond CO₂, the EU ETS also covers other greenhouse gases from specific sectors, including: - Nitrous oxide (N₂O) from the production of nitric, adipic and glyoxylic acids and glyoxal;
- Perfluorocarbons (PFCs) from primary aluminium production.
From January 2026, methane (CH₄) and nitrous oxide (N₂O) emissions from maritime transport will also fall under the EU ETS.
EU ETS revenues and
clean transition funding EU ETS revenues remain a major source of funding for Europe’s clean transition. In 2024, the system generated €38.8 billion, bringing total revenues since inception to over €250 billion.
These funds are primarily distributed to Member States to support climate action, clean energy deployment and innovation. Additional funding is channelled to the Innovation Fund, the Modernisation Fund, and the Recovery and Resilience Facility, including the REPowerEU plan.
Phase-in of maritime compliance costs Maritime transport has been introduced with a gradual phase-in of compliance obligations: - 2024 emissions: companies paid for 40% of compliance costs
- 2025 emissions: compliance increased to 70%
From 1 January 2026: companies must pay 100% of compliance costs
The regulation applies to ships of over 5,000 gross tonnage (GT) calling at EU ports and requires payment for emissions on a per-voyage basis.
Allowance cancellation
and auction adjustments Under Articles of the ETS Directive, when fewer allowances are surrendered than verified emissions during the phase- in period, the corresponding number of allowances must be cancelled from auctioning.
For 2024, a total of 54,243,768 allowances will be cancelled in 2026 through an amendment to the auction calendar.
Increase in allowances for non-co₂ maritime emissions Article 9 of the ETS Directive provides that, from January
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