ETS2 (buildings, road transport and additional sectors (other small industry))

What is ETS2?

What type of fuels are covered under ETS2?

Who are the Regulated Entities?

What next?

Further information

What is ETS2?

ETS 2 is a new EU carbon trading scheme, which will address the carbon dioxide (CO2) emissions from fuel combustion in the road transport sector, buildings, energy, manufacturing and construction industries.  

Companies regulated by the EU ETS must acquire carbon allowances. They can buy these on the carbon market or through the EU ETS auctions.  

These carbon allowances only exist electronically. The companies regulated by the EU ETS must open Union Registry accounts to hold these carbon allowances. The Union Registry is like an online banking system which holds carbon allowances instead of money. 

For ETS 2, there will be no free allocation. Auctioning revenues are to be used to finance the Social Climate Fund (SCF) or by the Member State for climate and social purposes. 

The Environmental Protection Agency (EPA) is the National Competent Authority for ETS2, responsible for implementing and administering the national and EU regulations on the permitting of regulated entities and their Monitoring, Reporting and Verification obligations. 

What type of fuels are covered under the EU ETS2

The EU ETS Directive has identified the fuels covered under ETS2 as follows:

• (un)leaded petrol,
• gas oil,
• kerosene,
• LPG,
• natural gas,
• heavy fuel oil,
• coal and coke;
• any other product intended for use, offered for sale or used as motor fuel or heating fuel as specified in Article 2(3) of the Energy Taxation Directive (ETD). This includes any fuel additives used as motor fuel, certain bio-based fuels, and any other hydrocarbons for heating purposes, except for peat.

That means the following types of fuels are currently excluded from the ETS2:

• Peat;
• Waste used as fuels (hazardous or municipal waste used as fuel, as explicitly excluded from the ETS2 scope in Annex III of the Directive);
• Waste-derived fuels (mostly used in ETS1 installations);
• Solid biomass (e.g. wood-based fuels);
• Charcoal from wood.

Who are the Regulated Entities?

ETS 2 will be different to ETS1. It is an “upstream” system, which means the focus will be on the fuel-supplier (i.e. the regulated entity) rather than the final fuel consumer (car owner/householder etc).

Article 3(ae) of the ETS Directive defines the ETS2 regulated entities and  can be summarised as follows:

• The authorised keeper of a tax warehouse (relevant for liquid fuels, in particular transport fuels) pursuant to Article 3(11) of the Excise Directive (ED),  who is liable to pay the excise duty pursuant to Article 7 of the ED. 
• If the above is not applicable, any other person liable to pay the excise duty pursuant to Article 7 of the ED or Article 21(5) first and fourth subparagraph Energy Taxation Directive (ETD) (mostly relevant for natural gas and solid fuels)
• If neither of the above are applicable any other person that has to be registered by the relevant competent authorities of the State for the purpose of being liable to pay the excise duty under the ETD, including any person exempt from paying the excise duty. 
• If all of the above are not applicable, or if several persons are jointly and severally liable for payment of the same excise duty, any other person designated by the competent authority for ETS2.

In simple terms, the regulated entities are generally the fuel suppliers who pay the excise duties (including the carbon tax).

What next? 

The Environmental Protection Agency (as National Competent Authority) will provide further advice and guidance to those regulated entities in the coming weeks and months.  

The timeline is laid out as follows:

Each regulated entity must report their historical emissions for the year 2024 by 30th April 2025. They may require a Registered Entity Holding Account (REHA) in order to enter data on the Union Registry (UR).  Following the initial report of their historical emissions, all regulated entities will be required to submit verified emissions report by 30th April each year thereafter. 

Keep an eye out for emails or notices relating to webinars or workshops which will be taking place over the coming weeks. If you have not received any notification but think you may be a regulated entity, please contact us at ets2@epa.ie and we will register you to attend the information sessions.

Further Information & Contact Details

• European Commission Website - ETS2: buildings, road transport and additional sectors
• EU ETS Directive - EU ETS Directive 2003/87/EC (consolidated text)
• Monitoring & Reporting Regulation - Monitoring and Reporting Regulation - Guidance Document

If you have any queries, you can contact us at ets2@epa.ie