New European Union Emissions Trading System (EU ETS2)
With the Directive (EU) 2023/959 a new emissions trading system for buildings, road transport and other sectors (such as small energy, manufacturing and construction) was created. This system is called the second emissions trading system, or abbreviated ETS2. The purpose of ETS2 is to reduce greenhouse gas emissions in the aforementioned sectors in an effective and economically efficient manner.
Scope and exemptions
The second emissions trading system will become fully operational in 2027 to fuels used for combustion in buildings, road transport and other sectors. Regulated entities belonging to EU ETS2 have a duty to monitor and report CO2 emissions, purchase necessary allowances at auction and surrender them in the Union Registry.
According to the EU ETS Directive, the second emissions trading system does not apply to fuels used in rail transport, domestic aviation and maritime, as well as in agriculture, fisheries, forestry and military purposes.
Reporting of ETS2
All ETS2 regulated entities must report and comply with the rules established by the EU ETS Directive, which will be transposed into national law (Atmospheric Air Protection Act). In addition, regulated entities must also comply with the requirements established in the Monitoring and Reporting Regulation and the Verification and Accreditation Regulation.
Regulated entities must hold a valid greenhouse gas emissions permit, which can be applied from KOTKAS. The greenhouse gas emissions permit permit is issued by the Environmental Board. Together with the permit application, regulated entities need to submit a monitoring plan through the EU ETS Reporting Tool (ERT) which is the basis for the monitoring of GHG emissions and verifying the emissions reports. Regulated entities are obliged to submit an updated monitoring plan to the Environmental Board, and the permit holder must immediately notify the Environmental Board of all such planned significant changes that may be the basis for amending the permit. For example, changes in the monitoring methodology used, in the field of activity, in the fuels allowed for consumption, etc.
All ETS2 reporting (submission of monitoring plans, emission reports, verification reports and improvement reports) takes place in ERT.
Timeline
ETS2 regulated entities must submit a verified emissions report to the Environmental Board by April 30 of each year, which contains data on the previous reporting period. If necessary, regulated entities must submit an improvement report by July 31. The report is submitted, for example, if the verifier has pointed out uncorrected non-conformities or recommendations for improvements in the verification report and/or the company must clarify within a certain period of time whether the application of the required tiers can be achieved and whether it is possible to use a more precise method for monitoring. The improvement report must also be approved by the Environmental Board.
Trading of EU allowances will begin on January 1, 2027. Allowances will have to be surrendered no later than May 31, 2028, in the amount corresponding to the verified CO2 emissions. In the years 2028–2030, the regulated entity must inform the competent authority of the average share of costs related to the surrender of allowances that it passed on to the consumer last year.
If you have any questions about ETS2, please contact through the main e-mail address: hks2@keskkonnaamet.ee
EU ETS Registry
All regulated entities belonging to the EU ETS2 must have a regulated entity holding account in the Union Registry. An account is necessary to receive and surrender allowances. Allowances valid during the trading period can be kept on the account and transfers can be made to other accounts in the registry. The holding account opening for the regulated entities will begin in mid-2026.
Transactions (e.g. the purchase and sale of allowances) in the European Union Greenhouse Gas Emissions Trading System are performed via an electronic registry that is common in all Europe (European Union Community Registry, EUCR). All national registries are connected to the International Transaction Log (ITL) and the European Union Transaction Log (EUTL), which check the issuance, transfer, surrender and cancellation of emission allowances. Registries and transaction logs store information about deposits and transactions on holding accounts.
The registry has been established in accordance with the EU ETS Directive and Article 6 of the European Commission Decision 280/2004/EC. The registry is managed and operations are carried out in accordance with Regulation (EU) 2019/1122 of the European Commission.
The registry includes holding accounts of ETS2 regulated entities, ETS1 stationary operators, aircraft operators and maritime operators. It also includes verifier accounts and trading accounts.
If you have any questions, please contact Estonian Registry Administrator:
The Ministry of Climate has conducted webinars (14.05.24 and 04.06.24) in which the EU Emission Trading System for fuels in buildings, road transport and other sectors was introduced. The webinars in English were held in cooperation with the European Commission and consulting companies Ricardo and Trinomics.
Training webinars
Legislation and guidance materials
- Directive 2003/87/EC of the European Parliament and of the Council – EU ETS Directive
- Commission Delegated Regulation (EU) 2019/1122 – Registry Regulation (RegReg)
- Commission Implementing Regulation (EU) 2018/2066 – Monitoring and Reporting Regulation (MRR)
- Commission Implementing Regulation (EU) 2018/2067 – Accreditation and Verification Regulation (AVR)
ETS2 templates and guidance documents in English are available on the European Commission's website, as well as ETS2 Tool for Unreasonable costs.
Contacts
Laura-Anett Kreevald
chief climate specialist
Mihkel Toom
senior climate specialist
Last updated: 08.05.2026
