EU member states have used 52% of free 2023 ETS allowances: EC

EU member states have used up 52% of their 2023 quotas of free carbon allowances under the bloc's Emission Trading System, continuing a trend seen last year, the European Commission said.

As of March 2, the 27 EU member states had taken 274 million mt in EU allowances out of a total of 526 mt EUAs that can be handed out for free to industrial emitters, EC data showed. In 2022, some 54%, or 288 mt EUAs out of a total of 533 mt EUAs were allocated as of March 17.

Austria, Belgium, Croatia, Estonia, Germany, the Netherlands, Slovenia and Sweden, have used up more than 90% of their free allocations, the data showed. Italy, Poland, Portugal and Spain have yet to use any free allowances.

Under the EU ETS, some sectors are given free allowances to reduce the risk of carbon leakage -- companies moving operations to avoid carbon costs.

As per the 2023 ETS compliance cycle, countries were allowed to grant free allocations until Feb. 28 while the deadline to surrender allowances is April 30.

However, from 2024 the adjusted issuance of free EU carbon allowances was expected to be delayed by four months to June 30 to account for the administrative work involved.

"The deadline for competent authorities to grant free allocation should therefore be postponed from Feb. 28 to June 30 and the deadline for operators to surrender allowances should be postponed from April 30 to Sept. 30," according to a draft text of the revised ETS directive.

The EC said the changes to the compliance cycle would only apply from 2024 if they are adopted by the European Parliament and the European Council.

Cap and trade

The EU's ETS cap and trade system places a limit on the level of emissions covered by different sectors. It includes around 45% of the bloc's total greenhouse gas emissions. The cap declines each year to guarantee emissions fall over time.

Companies can buy and sell carbon permits known as EU Allowances, which can be traded for the CO2 they emit.

The main purpose of the system is to reduce EU GHG emissions and carbon intensity to meet their net-zero targets, which includes a commitment of reducing net emissions by 55% by 2030.

EU Allowances, carbon permits under the EU ETS, recently hit record highs above Eur100/mtCO2e ($105/mtCO2e), which was attributed to technical signals and strong financial investor interest, along with the tightening of rules of the bloc's key climate policies, especially under its ETS.

December 2023 EU Allowances, which hit Eur101.16/mtCO2e on Feb. 21, have eased back to trade in a Eur93-Eur98/mtCO2e range in early March.

Platts, part of S&P Global Commodity Insights, assessed EU Allowances for December 2023 at Eur95.69/mtCO2e on March 7.