What type of fuels are covered under ETS2?
Who are the Regulated Entities?
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.
The EU ETS Directive has identified the fuels covered under ETS2 as follows:
That means the following types of fuels are currently excluded from the ETS2:
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:
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,
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.
ETS 2 will be different to ETS1. It is an “upstream” system, which means the focus will be on the fuel-supplier (i.e. the regulated entity) rather than the final fuel consumer (car owner/householder etc).
Article 3(ae) of the ETS Directive defines the ETS2 regulated entities and can be summarised as follows:
In simple terms, the regulated entities are generally the fuel suppliers who pay the excise duties (including the carbon tax).
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:
| When? | Who? | What? |
|---|---|---|
| By 31st August 2024 | Regulated Entity | Submit to the competent authority a Monitoring Plan for approval and open a registry account (See EU Guidance on Monitoring)) |
| Before 1st January 2025 | National Competent Authority | Approve Monitoring Plan and issue Greenhouse Gas permit |
| 30 April 2025 | Regulated Entity | Submit report on historic emissions (2024) - non-verified |
| 1st January 2025 (and annually thereafter) | Regulated Entity | Start of monitoring period |
| 31st December 2025 (and annually thereafter) | Regulated Entity | End of monitoring period |
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:
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:
If you have any questions or think you may be a regulated entity, please contact us at ets2@epa.ie
A short guidance document 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.
If you have any queries, you can contact us at ets2@epa.ie
