ETS2 (buildings, road transport and additional sectors (other small industry))

What is ETS2?

What type of fuels are covered under ETS2?

ETS2 and Ireland's carbon tax

Who are the Regulated Entities?

How do I register as a Regulated Entity?

What next?

Further information

NOTE: If you pay excise duty (including SFCT) to the Irish Revenue Commissioners for a fuel released for consumption in Ireland you are likely to be a Regulated Entity requiring an ETS2 GHG permit from the Irish EPA. If you pay excise duty in another Member State you need to contact the National Competent Authority in your country for ETS2.

What is ETS2?

ETS 2 is a new EU carbon trading scheme, which will address the carbon dioxide (CO2) emissions from fuel combustion in the road transport sector, buildings, energy, manufacturing and construction industries.  

Companies regulated by the EU ETS (fuel suppliers are the regulated entities) must acquire carbon allowances to cover the emissions arising from the fuels supplied annually to the above sectors. They can buy these on the carbon market or through the EU ETS auctions.  

These carbon allowances only exist electronically. The companies regulated by the EU ETS must open Union Registry accounts to hold these carbon allowances. The Union Registry is like an online banking system which holds carbon allowances instead of money. 

For ETS 2, there will be no free allocation. Auctioning revenues are to be used to finance the Social Climate Fund (SCF) or by the Member State for climate and social purposes. 

The Environmental Protection Agency (EPA) is the National Competent Authority for Ireland for ETS2, responsible for implementing and administering the national and EU regulations on the permitting of regulated entities and their Monitoring, Reporting and Verification obligations. 

The monitoring and reporting requirements and the obligation to hold a permit commence on 1 January 2025. 

What type of fuels are covered under the EU ETS2

The EU ETS Directive has identified the fuels covered under ETS2 as follows:

• (un)leaded petrol,
• gas oil,
• kerosene,
• LPG,
• natural gas,
• heavy fuel oil,
• coal and coke;
• any other product intended for use, offered for sale or used as motor fuel or heating fuel as specified in Article 2(3) of the Energy Taxation Directive (ETD). This includes any fuel additives used as motor fuel, certain bio-based fuels, and any other hydrocarbons for heating purposes, except for peat.

That means the following types of fuels are currently excluded from the ETS2:

• Peat;
• Waste used as fuels (hazardous or municipal waste used as fuel, as explicitly excluded from the ETS2 scope in Annex III of the Directive);
• Waste-derived fuels (mostly used in ETS1 installations);
• Solid biomass (e.g. wood-based fuels);
• Charcoal from wood.

The Monitoring & Reporting Regulation - General guidance for ETS2 regulated entities (MRR) outlines some guidelines regarding the special case of biomass in ETS2, which we are setting out below but it is best to discuss further with the EPA by emailing ets2@epa.ie :

According to Annex III of the EU ETS Directive, the release for consumption of fuels for which the emission factor is zero, is not considered in the scope of ETS2. The emission factor is zero only for biomass that complies with the sustainability and greenhouse gas emission-saving criteria established by RED II.

To identify whether entities supplying fuels containing biomass should be identified as ETS2 regulated entities, the following step-by-step approach can be applied:

1. If the entity supplies mixed fuels (fossil/biogenic) or fossil fuel streams and biogenic fuel streams, the regulated entity should apply for GHG emissions permit for ETS2 and monitor and report all fuel streams. This includes the obligation to demonstrate compliance with the RED II criteria, 

2. If all the fuels that an entity supplies can be proven RED II compliant, and thus zero-rated, to the satisfaction of the competent authority or if there is no obligation to prove RED II compliance for a certain biofuel, bioliquid or biomass fuel, then the entity does not have to apply for a GHG emissions permit for ETS2.

ETS2 and Ireland’s carbon tax

The relationship between ETS2 and Ireland’s carbon tax is explained on the website of the Department of the Environment, Climate and Communications.

Who are the Regulated Entities?

ETS 2 is different to ETS1. It is an “upstream” system, which means the focus is on the supplier of specified fuels to specified sectors (i.e. the regulated entity) rather than the final fuel consumer (car owner/householder, etc). ETS 2 regulated entities are generally the upstream fuel suppliers registered with Revenue for Mineral Oil Tax, Natural Gas Carbon Tax or Solid Fuel Carbon Tax. Mineral Oil Tax, Natural Gas Carbon Tax and Solid Fuel Carbon Tax registered suppliers may be exempted from paying these excise duties on certain supplies, for example on the basis that an excise relief is operated at source by the suppliers. However, it is important to note that such supplies still fall within scope of ETS 2.

Article 3(ae) of the ETS Directive defines the ETS2 regulated entities and can be summarised as follows:

• A Warehouse keeper pursuant to Article 3(11) of the Excise Directive (ED),  who is liable to pay the excise duty pursuant to Article 7 of the ED. “This includes suppliers who release fuel for consumption and are registered with Revenue for Mineral Oil Tax.”

• If the above is not applicable, any other person liable to pay excise duty pursuant to Article 7 of the ED or the first subparagraph of Article 21(5) of the Energy Taxation Directive(ETD). This includes Mineral Oil Tax registered suppliers who supply fuels not required to be kept in a tax warehouse, such as vehicle gas; i.e. natural gas and biogas for transport purposes. It also includes Mineral Oil Tax registered suppliers who release fuels for consumption under “irregular arrangements” such as where fuels are imported and transported directly to a place of supply. This description of regulated entities also includes suppliers of natural gas to consumers. Such suppliers are registered with Revenue for Natural Gas Carbon Tax.

• If neither of the above are applicable any other person that has to be registered by the relevant competent authorities of the State for the purpose of being liable to pay the excise duty under the ETD, including any person exempt from paying the excise duty as referred to in the fourth subparagraph of Article 21(5) of the Energy Taxation Directive. This includes suppliers registered for Solid Fuel Carbon Tax (other than peat and peat products) 

• If none of the above are applicable, or if several persons are jointly and severally liable for payment of the same excise duty, the Member State will designate who is the Regulated Entity for ETS2.

In an Irish context the regulated entity should be understood as the entity liable for payment of a carbon tax or excise duty to Irish Revenue Commissioners: The following (non-exhaustive list) may help:

How do I register as a Regulated Entity?

A short guidance document has been created to assist the Regulated Entities in registering with the National Competent Authority. The NCA will then provide you with access to the EU ETS Reporting Tool which is the platform where the Monitoring Plan will be submitted.

Guidance for initial set-up on EU-ETS Reporting for ETS2

What next? 

The Environmental Protection Agency (as National Competent Authority) will provide further advice and guidance to those regulated entities in the coming weeks and months.  

The timeline is laid out as follows:

Each regulated entity must report their historical emissions for the year 2024 by 30th April 2025. They may require a Registered Entity Holding Account (REHA) in order to enter data on the Union Registry (UR).  Following the initial report of their historical emissions, all regulated entities will be required to submit verified emissions report by 30th April each year thereafter. 

A webinar on ETS2 was held in May which provided an introduction to the workings of the EU ETS, the new ETS2, the compliance cycle and the timelines with which Regulated Entities need to comply. You can access the recording at the link below:

• Ireland ETS2 outreach support webinar on Vimeo

A detailed workshop for the regulated entities was held on 21 May and the slides and the recording can be accessed at the link below:

• Ireland ETS2 outreach support workshop on Vimeo
• Pdf of workshop slides

If you have any questions or think you may be a regulated entity, please contact us at ets2@epa.ie 

Further Information & Contact Details

• European Commission Website - ETS2: buildings, road transport and additional sectors
• EU ETS Directive - EU ETS Directive 2003/87/EC (consolidated text)
• Monitoring & Reporting Regulation - Monitoring and Reporting Regulation - Guidance Document
• Renewable Energy Directive - REDII Directive

If you have any queries, you can contact us at ets2@epa.ie