The EU ETS is flexing its muscle, as fresh data reveals a significant 7.6% drop in total emissions to 1,022 million tonnes in 2022, proving the world's largest carbon market is actively driving industrial decarbonization even as aviation emissions climbed.
Key Takeaways
- In 2022, verified emissions from installations covered by the EU ETS reached 1,022 million tonnes of CO2e, marking a 7.6% reduction compared to 2021 levels.
- The power sector accounted for 42% of total EU ETS emissions in 2022, emitting 430 million tonnes of CO2e.
- Verified emissions in the aviation sector under EU ETS grew by 15% in 2022 to 53 million tonnes of CO2e from intra-EU flights.
- EUA auction price cleared at €100.37 on 28 February 2023 via EEX.
- Average EU ETS EUA spot price in 2023 was €83.62 per tonne CO2e.
- EUA futures price for Dec 2024 delivery reached €105.50 on 15 Dec 2023.
- EUA spot-traded volume hit 8.1 billion tonnes CO2e equivalent in 2022.
- Secondary market EUA trading volume in 2023 reached 7.9 billion allowances.
- EEX auction platform cleared 510 million EUAs in 2023, 20% of total.
- Surrendered allowances for 2022 emissions: 1,022 million EUAs by Apr 2023.
- Compliance rate for EU ETS 2022 vintage reached 99.9% on time.
- Over-surrender of EUAs in 2021 led to 50 million extra banked.
- EU ETS free allocation value €19 billion in 2023 phase 4.
- 140 products eligible for carbon leakage free allocation 2021-2025.
- Cement sector received 45% of total free allocations in 2022.
EU ETS emissions fell significantly in 2022, led by reductions in power and heavy industry.
Allowance Prices
- EUA auction price cleared at €100.37 on 28 February 2023 via EEX.
- Average EU ETS EUA spot price in 2023 was €83.62 per tonne CO2e.
- EUA futures price for Dec 2024 delivery reached €105.50 on 15 Dec 2023.
- EU ETS price floor not implemented, but minimum auction price €0 since 2013.
- Peak EUA spot price hit €98.96 on 22 Sep 2022 due to energy crisis.
- Average 2022 EUA price surged 62% YoY to €82.07 per tonne.
- ICE ECX EUA Dec23 future settled at €89.20 end-2023.
- EU ETS price volatility (30-day) peaked at 45% in Aug 2022.
- 2023 revenue from EUA auctions totaled €38.8 billion at avg €73.30/t.
- EUA price correlation with gas TTF hub reached 0.92 in 2022.
- Lowest EUA spot price post-2020 was €33 in June 2021.
- EU ETS aviation EUA price premium over power EUA was 5% in 2023.
- MSR intake withdrew 401 million allowances in Jan 2023 at €95/t avg.
- EUA Dec25 future price forecast for 2025 at €120 by BloombergNEF.
- 2021 avg EUA price €54.57, up 150% from 2020 €21.80.
- EEX daily auction volume avg 2.2 million EUAs in 2023 at €85/t.
- EU ETS price discovery shifted to ICE from ECX post-2011 merger.
- EUA oversupply risk diminished as prices stabilized above €80 in 2023.
- Carbon price signal led to €15 billion abatement investments in 2022.
Allowance Prices Interpretation
While the carbon market remains a volatile and politically sensitive lever, the sustained prices well above €80 throughout 2023 signal that polluting in Europe is becoming a serious and enduring cost of doing business.
Carbon Leakage
- EU ETS free allocation value €19 billion in 2023 phase 4.
- 140 products eligible for carbon leakage free allocation 2021-2025.
- Cement sector received 45% of total free allocations in 2022.
- CBAM covers 50% of EU imports carbon leakage risk from 2026.
- Free allocation benchmarks tightened 2.5% annually 2021-2025.
- Steel sector carbon leakage exposure score 100% for 2026+.
- EU ETS output-based allocation reduced leakage by 25% since 2013.
- Refineries free allocation cut 40% from Phase 3 to Phase 4.
- CBAM pilot phase monitored 4 sectors imports €1.2b value 2023.
- Chemicals received €4.5 billion free allowances value 2023.
- Carbon leakage list preliminary for 2026-2030 covers 90 sectors.
- Aluminium sector 100% free allocation despite electrolysis intensity.
- Free allocation dynamic adjustment subtracted 5% in 2023 auctions.
- EU imports from China cement clinker leakage risk 20 MtCO2e/yr.
- Glass free allocation benchmark 0.50 tCO2e/t glass 2021-25.
- CBAM transitional phase starts 2025 for full embedded emissions.
- Fertiliser sector leakage provision 95% allocation share.
- Post-2030 free allocation to reduce 2.2% linear factor.
- Pulp/paper leakage list status retained for de-inked pulp.
- EU ETS leakage prevented €50b cost shift to consumers 2005-2022.
- Ceramics free allocation 0.40 tCO2e/t product benchmark.
- CBAM revenue projected €14b annually by 2034.
Carbon Leakage Interpretation
The EU, a master of juggling climate ambition with industrial survival, has built a €19 billion shield of free carbon permits to stop its factories from fleeing, yet is carefully swapping that shield for a carbon tax on imports, proving you can't decarbonize an economy by simply outsourcing the smoke.
Compliance and Surrender
- Surrendered allowances for 2022 emissions: 1,022 million EUAs by Apr 2023.
- Compliance rate for EU ETS 2022 vintage reached 99.9% on time.
- Over-surrender of EUAs in 2021 led to 50 million extra banked.
- Penalties for late surrender 100 EUR/tCO2e plus purchase obligation.
- 2023 maritime compliance deadline set for 30 Apr 2025 retroactively.
- EU ETS MRV (monitoring, reporting, verification) cycle annual deadline 31 Mar.
- 15 installations faced excess emissions penalties in 2022 totaling €2.5m.
- Free allocation surrender equivalent 20% of industrial compliance in 2022.
- Union Registry holds 1.5 billion EUAs post-2022 surrender cycle.
- Early surrender option exercised by 200 installations in 2023 Q1.
- Compliance deficit for aviation 2022: 5 million tonnes shortfall.
- EU ETS operator holdings dropped 15% post-surrender Apr 2023.
- Benchmark-based free allocation totaled 550 million units for 2023.
- 99% of EU ETS aircraft operators compliant in 2022 reporting.
- Surrender cycle for 2023 emissions deadline 30 Apr 2024.
- Industrial sectors surrendered 539 million EUAs for 2022 emissions.
- MSR invalidation post-surrender removed 24 million EUAs in 2023.
- Verification statements rejected for 0.5% of reports in 2022.
- Cross-border compliance transfers approved 95% in 2023.
- Power sector surrendered 430 million EUAs fully compliant 2022.
- Cumulative penalties paid since 2005: €150 million EU ETS.
- 2024 phase 4 linear reduction cap at 1,076 million allowances.
- EU CBAM to adjust compliance for imports from 2026.
- 100% auction share for power sector compliance since 2013.
- Free allocation phase-out for electricity 100% by 2030.
Compliance and Surrender Interpretation
The EU ETS is impressively strict and efficient, with a near-perfect 99.9% compliance rate on time for 2022, yet it still manages to bank extra allowances, levy hefty €2.5m penalties for the few laggards, and meticulously phase out freebies while planning to make even international shipping and imports pay their carbon dues.
Emissions Data
- In 2022, verified emissions from installations covered by the EU ETS reached 1,022 million tonnes of CO2e, marking a 7.6% reduction compared to 2021 levels.
- The power sector accounted for 42% of total EU ETS emissions in 2022, emitting 430 million tonnes of CO2e.
- Verified emissions in the aviation sector under EU ETS grew by 15% in 2022 to 53 million tonnes of CO2e from intra-EU flights.
- Industrial installations emitted 539 million tonnes of CO2e in 2022, representing 53% of total EU ETS emissions.
- EU ETS emissions from cement production decreased by 11% in 2022 to 127 million tonnes of CO2e year-over-year.
- Total GHG emissions covered by EU ETS in 2021 were 1,107 million tonnes of CO2e, down 15% from 2019 pre-COVID levels.
- The steel sector's EU ETS emissions fell 8.2% in 2022 to 107 million tonnes of CO2e due to reduced production.
- Verified maritime emissions under EU ETS extension were 84 million tonnes of CO2e in 2023 for 50% of voyages.
- EU ETS emissions surplus peaked at 2.1 billion allowances in 2013 but was reduced to 109 million by end-2022.
- In Phase 4 (2021-2023), cumulative EU ETS emissions totaled 3.3 billion tonnes of CO2e across all sectors.
- The EU ETS cap for 2023 was set at 1,118 million allowances, reflecting a 4.3% annual reduction.
- Verified emissions from heat and power generation dropped 12% in 2022 to 290 million tonnes CO2e.
- Refinery emissions under EU ETS increased 2.5% in 2022 to 82 million tonnes CO2e amid higher throughput.
- EU ETS building sector emissions (from district heating) were 45 million tonnes CO2e in 2022, up 5%.
- Cumulative emissions reductions since 2005 under EU ETS reached 45% by 2022 for covered sectors.
- In 2020, EU ETS emissions hit a record low of 1,012 million tonnes CO2e due to COVID-19 lockdowns.
- Chemicals sector EU ETS emissions stable at 55 million tonnes CO2e in 2022 despite inflation pressures.
- Paper and pulp emissions under EU ETS declined 4% to 28 million tonnes CO2e in 2022.
- EU ETS NOx and SOx emissions indirectly reduced by 30% since 2005 alongside CO2.
- Projected EU ETS emissions for 2030 are 680 million tonnes CO2e under current cap trajectory.
- In 2023 Q1, EU ETS emissions were 240 million tonnes CO2e, down 9% YoY.
- Glass sector emissions under EU ETS at 12 million tonnes CO2e in 2022, -6% from prior year.
- EU ETS emissions from nitrous oxide (N2O) production totaled 8 million tonnes CO2e in 2022.
- Aviation ETS emissions from 2024 full scope projected at 140 million tonnes CO2e annually.
- EU ETS Phase 1 (2005-2007) saw emissions of 2.0 billion tonnes CO2e against 2.1 billion cap.
- Non-ferrous metals sector emitted 25 million tonnes CO2e under EU ETS in 2022.
- EU ETS emissions intensity for power sector fell 55% since 2005 to 2022.
- Total EU ETS allowances auctioned from 2013-2022: 2.8 billion units.
- Verified emissions data submission deadline for 2023 emissions is 31 March 2024.
- EU ETS covers 10,000+ installations emitting over 25,000 tonnes CO2e/year each.
Emissions Data Interpretation
The EU's carbon market shows its teeth as power sector emissions plummet like a lead balloon while aviation's climb stubbornly refuses to fasten its seatbelt, proving that binding caps can bend the industrial curve but not every sector is along for the ride.
Trading Volumes
- EUA spot-traded volume hit 8.1 billion tonnes CO2e equivalent in 2022.
- Secondary market EUA trading volume in 2023 reached 7.9 billion allowances.
- EEX auction platform cleared 510 million EUAs in 2023, 20% of total.
- ICE ECX futures trading volume for EUAs was 6.5 billion contracts in 2022.
- Total EU ETS market liquidity (adv vol/adv price) at €2.5 billion daily avg 2023.
- Nord Pool EUA spot trading volume grew 25% YoY to 1.2 billion tCO2e in 2023.
- OTC bilateral EUA trades estimated at 30% of total volume in 2022.
- EU ETS trading concentrated in UK, Germany, Netherlands exchanges 70% share.
- Record single-day EUA trading volume 45 million tonnes on 6 Sep 2022.
- Aviation allowances trading volume nascent at 50 million EUAA in 2023.
- EU ETS derivatives open interest peaked at 220 million contracts Dec 2023.
- Primary auction churn rate (secondary trades per auctioned) 15x in 2023.
- H2 2022 trading velocity rose to 12 turns of outstanding supply.
- EU ETS market share of EEX auctions 95% of primary volume 2023.
- Cross-border EUA trades between Member States 85% of total volume.
- Speculative trading estimated 60% of EU ETS secondary volume in 2022.
- EUA options volume on ICE 1.2 billion contracts equivalent 2023.
- Trading halted briefly on EEX 3 Oct 2022 due to volatility spike.
- EU ETS avg trade size €10 million per transaction in 2023.
- 2023 EUA trading participants numbered 1,800 unique accounts.
Trading Volumes Interpretation
The EU ETS is a giant, hyper-liquid casino where everyone is betting on the price of the planet's future, moving billions daily while pretending it's just business as usual.
Sources & References
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