ETS2: buildings, road transport and other sectors. Households pay extra for heating emissions.

As part of the 2023 revisions to the ETS Directive, a new emissions trading system called ETS2 was created, which is separate from the existing EU ETS. This new system will cover and address CO emissions ₂ from burning fuels in buildings, road transport and other sectors (especially small industries not covered by the existing EU ETS).

ETS2 will complement other European Green Deal policies in the sectors covered by helping Member States achieve their emission reduction targets under the Effort Sharing Regulation (ESR). Emissions reductions in these sectors have so far been insufficient to put the EU on a firm path to the goal of climate neutrality by 2050. The carbon price set by the ETS2 system will provide a market incentive for investment in building renovations and low-emission mobility.

ETS2 will be fully operational in 2027. Although it will be a "cap and trade" system like the existing EU ETS, ETS2 will cover emissions along the supply chain. It will be fuel suppliers rather than end consumers such as households or car users who will have to monitor and report their emissions. These entities will be regulated under ETS2, which means they will have to surrender enough allowances to cover their emissions. Regulated entities will purchase these quotas at auctions. The ETS2 cap will be set to reduce emissions by 42 % by 2030 compared to 2005 levels. (More on climate.ec.europa.eu)