The New System of Permits for Diffuse Emissions in the European Policy Mix

ETS2 aims to complement ETS1 by covering emissions from the transportation and construction sectors, in addition to emissions from energy and industry. Launched by the European Commission with the Green Deal in 2018, ETS2 should be fully operational by 2027 and begin emissions monitoring in 2024. The emissions cap for ETS2 will decrease by around 62 million tons of CO₂ each year. Emissions quotas will be adjusted and reduced each year, and all permits will be auctioned off. Mechanisms are in place to avoid price spikes, which include adjustments based on natural gas and oil prices and a Market Stability Reserve (MSR). Complementary policies to limit the inequalities arising from ETS2 are essential, notably with the creation of a Social Climate Fund (SCF), which will be funded by the proceeds from selling emissions quotas.