Climate Action

Carbon Market Report: ETS surplus falling to lowest level since 2013


The European Commission has adopted its annual report on the functioning of the European carbon market in the context of the third State of the Energy Union report.

This carbon market report covers the year 2016, but it also presents certain initiatives proposed or agreed in 2017.

The report concluded that in 2016, the EU ETS has delivered emission reductions of 2.9% from participating installations, marking a decreasing trend in emissions since the start of phase 3 in 2013, while the surplus of allowances in the carbon market fell to 1.69 billion allowances, its lowest level since this start.

Moreover, with the publication for the first time in May 2017 of the Market Stability Reserve surplus indicator, a first step has been made towards the starting of operation in 2019 of the Market Stability Reserve, the EU ETS’s structural solution for stabilising the European carbon market in the midterm.

Under the new rules agreed in November 2017 which would apply as of phase 4 (2021-2030), the revised and substantially strengthened EU ETS will continue to be a cost-effective driver for low-carbon investments for the years to come. It will also be a major part of the EU contribution to the implementation of the Paris agreement towards a global low-carbon transition.

The issues covered by the report include:

  • EU ETS infrastructure,
  • Functioning of the carbon market (allowances put in and taken out of circulation, balancing supply and demand),
  • Aviation,
  • Market oversight,
  • Monitoring, reporting and verification of emissions,
  • Overview of administrative arrangements in Member States,
  • Compliance and enforcement.

As a new element, this year's report also contains a chapter on indirect carbon cost compensation schemes.

The Commission will continue to monitor the carbon market and provide the next report in fourth quarter of 2018.

Read more: