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At the end of July, the European Commission initiated an infringement procedure by sending a letter of formal notice to 26 Member States for failing to fully transpose into national law the provisions of the revised EU Emissions Trading System Directive (EU ETS) related to new emissions trading system for road and buildings (ETS 2).

All EU countries except Austria failed to transpose the ETS 2 provisions into their national law before the deadline set on 30 June 2024.  Germany only made some progress early August, publishing a draft proposal to transition Germany’s national fuel emission trading system to the ETS 2. While ETS 2 is set to start at the earliest in 2027, the revised Directive also provides for the allocation of emissions trading revenues (estimated at around €260 billion between 2026 and 2032, assuming an average €45 per tonne of CO2) to the new Social Climate Fund, which will start operating in 2026 and will provide dedicated funding (up to €86.7 billion) to Member States to support the most affected vulnerable groups. The Commission therefore calls on Member States to finally transpose the ETS 2 provisions to secure the revenues to be used for their social climate policies and provide certainty to those affected by the new scheme, with a clear investment signal for the decarbonisation of road transport for example.

Member States have until the end of September to reply to the Commission and complete their transposition. If they do not do so, the Commission may decide to issue a reasoned opinion to these Member States. If they still do not comply, the Commission may bring a proceeding before the European Court of Justice which could result in substantial fines.