EU member states have used 62% of free 2023 ETS allowances: EC

EU member states have used up 62% of their 2023 quotas of free carbon allowances under the bloc's Emission Trading System, a much higher percentage than the same period last year, the European Commission said March 20.

As of March 16, the 27 EU member states had taken 327 million mt in EU allowances out of a total of 526 mt EUAs that can be handed out for free to industrial emitters, EC data showed. Last year, some 54%, or 288 mt EUAs out of a total of 533 mt EUAs had been allocated as of March 17.

Austria, Belgium, Croatia, Estonia, Germany, the Netherlands, Slovenia and Sweden have used up more than 90% of their free allocations, the data showed. Poland, Portugal, Spain, Ireland and Finland have yet to use any free allowances.

As per the 2023 ETS compliance cycle, countries were allowed to grant free allocations until Feb. 28 while the deadline to surrender allowances is April 30.

However, from 2024 the adjusted issuance of free EU carbon allowances is expected to be delayed by four months to June 30 to account for the administrative work involved.

Price volatility

Under the EU ETS, some sectors are given free allowances to reduce the risk of carbon leakage -- companies moving operations to avoid carbon costs.

The EU's ETS cap and trade system places a limit on the level of emissions covered by different sectors. It includes around 45% of the bloc's total greenhouse gas emissions. The cap declines each year to guarantee emissions decline over time.

The main purpose of the system is to reduce EU GHG emissions and carbon intensity to meet net-zero targets, which includes a commitment to reduce net emissions by 55% by 2030.

EU Allowances, carbon permits under the EU ETS, have experienced a very volatile few weeks, with prices oscillating between Eur83/mtCO2e and Eur101/mtCO2e . EU carbon prices have fallen sharply after they hit record highs in early March due to weak demand and tepid auction results along with macroeconomic concerns.

EU Allowances under the December 2023 contract were trading at Eur89.47/mtCO2e at 0909 GMT on March 21, a sharp decline from March 10 when they were at Eur100.12/mtCO2e, ICE data showed.

Platts, part of S&P Global Commodity Insights, assessed EUAs for December 2023 at Eur87.83/mtCO2e on March 20.