On Wednesday, the European Commission released its latest Carbon Market Report, offering “a comprehensive overview of how the EU ETS performed in 2024 and the first half of 2025.”

The report also outlines upcoming changes to the system’s framework, including the adjustment to the emissions cap. “This gives companies in the ETS certainty about the expected scarcity of supply of allowances,” the Commission explained.

To meet the emissions reduction targets set for 2030 compared to 2005 levels, the annual reduction factor has been raised to 4.3% for the period 2024–2027. The 2023 revision of the ETS Directive also introduced two one-off reductions in the emissions cap: a 90-million-allowance cut in 2024 and another 27-million-allowance cut scheduled for 2026.

In addition to the one-off reduction in 2026, the report also details further adjustments to the EU ETS cap arising from the system’s expansion to methane and nitrous oxide emissions from maritime transport, as well as the updated list of small emitters excluded from the EU ETS.

As a result, the total number of allowances for electricity and heat production, industrial activity, and maritime transport will fall from 1.298 billion in 2025 to 1.185 billion in 2026, representing an 8.68% decrease. For aviation, 24.90 million allowances will be issued in 2026, down from 26.23 million in 2025, amounting to a 9.05% annual reduction.