EU ETS auction revenue decreases in 2024

Market: Emissions
23/12/24

Revenue from the sale of EU emissions trading system (ETS) allowances decreased in 2024 despite a higher volume of ETS being sold, as the average settlement price fell by 23pc.

EU ETS primary market auctions generated around €39bn ($40.6bn) this year, down from €44bn in 2023. Revenue decreased despite a higher overall volume of ETS being sold at auction, with around 599mn permits sold in 2024 compared with 523mn in the previous year.

The auctions cleared at an average price of €64.76/t of CO2 equivalent (CO2e) in 2024, considerably lower than the 2023 average of €83.60/t CO2e.

Lower demand for permits weighed on carbon prices in 2024. Eurozone manufacturing performance has contracted consistently since July 2022, and there has been an accelerated decline in new factory orders, production and purchasing, data from Hamburg Commercial Bank show, reducing industrial activity and therefore compliance demand for carbon allowances.

This fall in industrial activity also reduced power use, which combined with continued renewables build-out has reduced the carbon intensity of the region's generation mix.

The top five highest-emitting countries in sectors covered by the EU ETS — Germany, Poland, Italy, Spain and France — all recorded record low stationary emissions in 2023, which reduced buying demand ahead of the 30 September compliance deadline for last year's emissions.

Uncertainty regarding future EU ETS supply has also weighed on the value of permits this year. The bloc has auctioned additional allowances since July 2023 in an attempt to raise €20bn for its REPowerEU initiative by 2026, but it has not specified how many permits it expects to sell, presenting the possibility that auction volumes could be increased if revenue falls short.

Around €5.60bn were raised in EU ETS auctions for REPowerEU in 2024, increasing from €2.82bn a year earlier. The European Commission confirmed last month that it will not adjust scheduled sales volumes until September next year at the earliest.

A total of €2.29bn were raised through sales this year for the EU's innovation fund — designed to stimulate low-carbon technology development in the bloc — up from €1.81bn in 2023. And revenue for the EU's modernisation fund — which supplies lower-income member states with financing to improve their energy systems — rose to €6.27bn in 2024 from €5.61bn a year earlier.

All remaining revenue from EU ETS actions was returned to member state governments, which have been obliged to spend 100pc of these funds on climate and energy-related projects since the beginning of this year .

EU ETS auctions will resume on 7 January.

UK ETS auction revenue tumbles

A total of 68.96mn permits were auctioned under the UK ETS in 2024, bringing in £2.56bn ($3.21bn) in revenue. This compares with revenue of £4.20bn from the 78.74mn allowances sold last year.

Alongside the lower number of permits for sale, revenue was squeezed by weaker UK carbon prices. UK ETS auctions cleared at an average of £37.18/t CO2e this year, down from an average of £53.36/t CO2e in 2023.

This was largely a function of similar conditions to those seen in the EU. The UK's production sector contracted in the second and third quarters of the year, government statistics show.

And the country's last coal-fired power plant closed in September, reducing the carbon intensity of its generation mix.

UK ETS auctions will resume on 8 January.

By Navneet Vyasan

EU ETS annual auction revenues €bn

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