EU ETS Cuts Emissions 5% In 2024, Power Leads Shift

The European Union's showpiece climate policy, the Emissions Trading System (ETS), keeps on showing robust momentum in the battle against climate change. In a recent report published by the European Commission, greenhouse gas emissions from the sectors subject to the ETS fell by 5% in 2024. This reduction has the cumulative figure of emissions cut by some 50% since the system's inception in 2005, highlighting the ETS's role as a major component in Europe's climate policy.

The ETS, a cap-and-trade system, imposes a ceiling on emissions for the large polluting industries and enables firms to sell and purchase emissions allowances, providing a financial incentive to cut pollution. The 2024 figures reaffirm the scheme's success, as the European Commission highlighted that this continued downward trend verifies both the efficiency and the policy effectiveness of the ETS in leading Europe's decarbonization process. With the EU working towards a 62% emissions reduction by 2030, the current path suggests that the goal is in sight.

Central to the 2024 decline in emissions is the power sector, which is still the greatest source of decarbonization within the EU. Electricity generation emissions decreased by a significant 12% year-on-year, driven mostly by a substantial change in the energy mix towards low-carbon sources. Renewable power generation grew by 8%, with solar power taking the lead, posting a stunning 19% growth. Hydropower also grew, while nuclear power generation grew by 5%. Meanwhile, the proportion of fossil fuels in electricity generation continued to fall, with gas and coal-based generation falling by 8% and 15% respectively. In contrast, while facing weather-related hurdles that restrained growth in wind power, overall electricity generation was stagnant with respect to last year, a testament to the successful accommodation of renewables without sacrificing energy supply.

Progress in decarbonizing the other sectors under the ETS is more varied. Industry-intensive sectors presented differing stories in 2024. While others reduced emissions, others experienced growth. The fertilizer industry recorded a 7% increase in emissions, as expected of a 6% increase in production, indicating a linear relationship between industrial output and emissions. The cement industry, on the other hand, reported a 5% drop in emissions, as it also dropped in production output. These are indicative that while effective, there are still some industries that need to be specifically targeted to decouple production from pollution.

The aviation sector also experienced a high spike in emissions, which increased by 15% in 2024. This increase was partly because of increased ETS coverage, which now covers non-domestic flights to and from the outermost regions of the EU. With air travel recovering after the pandemic, aviation is one of the tougher sectors to decarbonize because there are few alternatives for fossil-based jet fuels. However, its inclusion in the ETS is a move towards bringing all significant sources of emissions under the bloc's climate regime.

In the future, the ETS will rake in approximately €40 billion from 2020 to 2030, which will be channeled into climate-related programs. These monies fund green innovation, clean energy initiatives, and adaptation efforts throughout member countries. Additionally, the EU further refines the ETS by strengthening it with structural reforms in terms of tighter emission cap and increasing sectoral coverage, boosting its effect over the long run.

2024 data on emissions under the ETS presents a largely encouraging picture of the EU's under this regime. With the electricity sector making significant strides through using renewables and cleaner fuels, and gradual if patchy progress in industry and aviation, the system remains at the heart of the EU's ambitious climate ambitions. As the bloc approaches its 2030 and 2050 goals, the ETS is likely to continue as a linchpin of the European Green Deal, providing a scalable and flexible approach for other parts of the world seeking low-carbon economic change.