Use of auctioning revenues generated under the EU Emissions Trading System

Most emission allowances under the EU Emissions Trading System (ETS) are auctioned. Revenues from these auctions are primarily distributed to countries covered by the ETS and dedicated European Union level funds. As carbon prices have increased significantly since 2017, so too have the revenues that EU Member States collect from the ETS auctions, growing from EUR 5 billion in 2017 to EUR 24 billion in 2024. This represents a significant decline compared with the EUR 33 billion recorded in 2023.

Figure 1. Member State auctioning revenues and reported usage, (Billion EUR), 2013-2024, scope EU-27

The EU ETS is a ‘cap and trade’ system covering electricity and heat generation, energy-intensive industries, maritime transport and aviation within the European Economic Area. It includes flights to Switzerland and the United Kingdom, and 50% of emissions from maritime transport voyages starting or ending outside the EU. Expressed in allowances, the cap limits the total amount of greenhouse emissions cumulatively emitted by companies covered by the EU ETS. Each company must surrender enough allowances to account for their greenhouse gas emissions annually. A share of the allowances is freely allocated, yet the majority are auctioned in a public authority led process. Companies can trade allowances, effectively establishing a European carbon market.

Several amendments to the EU ETS Directive have been adopted to achieve the goals set out in the European Climate Law. Since the revised Directive took effect in June 2023, Member States are obliged to use 100% of the revenue collected (or a financial equivalent) to support specific climate action and energy transformation purposes, except for any revenue that Member States spend in aid for electricity-intensive industries for indirect carbon costs . Before June 2023, Member States were encouraged to spend at least 50% of their revenues on those purposes.

Purposes for which Member States can spend these revenues are in the following categories:

industrial decarbonisation;
energy transformation;
clean tech technologies;
adaptation to climate change;
decarbonisation of the transport sector;
actions for just transition.

Revenues generated from auctioning EU ETS allowances are an increasing source of income for Member States and have significantly risen since 2017 along with carbon prices. The price reached an annual average of €65 per tonne of carbon dioxide (tCO₂) in 2024, up from an annual average of EUR5/tCO₂ in 2017 and EUR25/tCO₂ in 2020.

Total auctioning revenues generated under the ETS system amounted to EUR 38,8 billion in 2024, of which EUR 24,4 billion went directly to Member States. The remaining to the Innovation Fund (EUR 2,4bn), the Modernisation Fund (EUR 6,3bn), the Recovery and Resilience Facility (EUR 5.6bn), and the EFTA countries and Northern Ireland (EUR 0,25b).

Despite more allowances being auctioned in 2024 compared to 2023 (+15%), the drop in revenue distributed to Member States can be explained by an 18% drop in the average price of allowances in 2024 (EUR 64.8/tCO₂e) compared to 2023 (EUR 83.6/tCO₂e) and, by a larger share of overall revenues allocated to European funds. Funds such as the Modernisation Fund (+12%), Innovation Fund (+26%) and Recovery and Resilience Facility funds (+60%), all contributing to investments in the Member States' climate action.

Over the last decade, Member States used most of their auction revenues on domestic actions. Data on 2024 spending shows revenue used for domestic purpose by category of action. In this year, 80% of revenue used domestically went to domains of energy supply, grids and storage (e.g. renewables, self-consumers), industry, road transport and public transport and active mobility. Overall, the amounts spent on projects at international level – mostly benefiting developing countries via multilateral funds and institutions - have remained small and relatively unchanged since 2018 (at around €100-€200m per year). Between 2013 and 2022, around 75% of auctioning revenues were reported as committed or disbursed for climate- and energy-related purposes across the EU-27, well above the 50% target.

Figure 2. Auctioning revenues and reported usage, (Million EUR), in 2024, for each Member State

From June 2023, all relevant ETS revenue must be spent on climate and energy related actions, but does not need to be fully spent in the year of generation. The only exception to this rule allows Member States to use ETS revenues to support electricity-intensive industries in covering indirect carbon costs. Ten Member States used their revenue for this purpose in 2024, amounting to EUR 3.2 billion out of EUR 24.4 billion; the remaining EUR 21,2 billion must be used for climate action.

Member States reported having already disbursed 67% of the revenue generated in 2024, for energy and climate purposes. Germany generated the highest EU ETS auctioning revenue in in 2024, at EUR 5.5 billion, followed by Poland (EUR3.8bn), Spain and Italy (EUR 2.6 and EUR 2.6bn respectively).

Together, these high generating Member States account for about 60% of the auctioning revenues that went directly to all EU-27 Member States in 2023. Over half of Member States have already declared to meet the 100% target of spending all revenue generated in 2024 (other than the revenues used for indirect carbon compensation).

Supporting information

DefinitionMethodology

Member States report annually on the use of auctioning revenues for climate change- and energy-related purposes, under Article 17 of Regulation (EU) No 525/2013. Member States shall report on the amounts and the use of auctioning revenues under the Regulation on the Governance of the Energy Union and Climate Action (2018/1999, Article 19(2)) and, from 2021 to 2023, under Annex II of Implementing Regulation 2020/1208, and from 2024, under Implementing regulation 2024/1281. These data have been used to estimate the share of revenues used for climate change- and energy-related purposes as shown in this indicator.

Note that Figures 1 and 2 above shows only the EU ETS revenues share that went directly to Member States (e.g. in 2021, the total EU ETS auctioning revenues amounted to €31 billion, of which €25 billion went directly to the 27 Member States).

Data from 2013 to 2022:

Annual reporting does not necessarily cover on how the revenues of that year are spent, but the spending of revenues during that year, i.e. it can include revenues from earlier years.

Spending is understood as comited and disbursed money in a given year.

Member States only report on spending for the purposes of addressing climate change and energy, but this does not mean that the amount not covered in the report is necessarily spent for other purposes: it is also possible that revenues are spent later, or used to fund many projects/activities, only part of which are linked to climate change and energy, or that a certain amount has been set aside for climate and energy but not all of it has yet been formally attributed to specific projects.

Additionally, multiple Member States do not earmark their auction revenues for a specific purpose, but instead attribute part or all of their revenues to a broad budget such as the general budget, that is funded by multiple sources. The general budget can then be spent on both climate change and energy and other purposes. Often, in such cases example projects funded by the broad budget are reported, but a direct link to auctioning revenues cannot be made. Reported spending can also be higher than the revenues of that year, if either it includes spending of previous years’ revenues or if the reported projects were co-funded with other funds. For the purposes of the estimated shares spent on climate and energy, the annual shares have been capped at 100% in order to avoid distortion of the figures.

Data from 2023:

The data includes only the spending (disbursed money) in year X from the revenues generated in year X (revenues from earlier years spent in 2024 and later are not included).

Revenues not yet disbursed, committed or reported in were derived by subtracting the total amount of revenue generated by the amounts reported as disbursed or committed by Member States.

Specific methodological notes on individual country data are available in the Commission’s " Climate Action Progress Report 2024".

Policy/environmental relevanceAccuracy and uncertaintiesData sources and providers

Metadata

DPSIRTopicsTagsTemporal coverageGeographic coverage

TypologyUN SDGsUnit of measureFrequency of dissemination

References and footnotes

The EU ETS Directive permits Member States to provide compensation to the most electricity-intensive sectors to offset higher electricity costs resulting from the EU ETS. This can be done through national state aid programs, with the aim reduce the risk of “carbon leakage”, where companies relocate production to countries outside the EU where less ambitious climate policies are in place. Member States are encouraged to allocate no more than 25% of auctioning revenues for this purpose. If they exceed this limit, they must provide justification.
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The different purpose are listed in the EU ETS Directive.
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