ETS2 was created as a result of lagging emissions reductions in buildings and road transport – CO₂ emissions from building energy use have decreased by only 14.7% since 2015, while emissions reductions from road transport have stalled in the last decades.

Pricing the carbon pollution of buildings and road transport will complement, rather than replace, emissions standards and existing policies to reduce these emissions such as the Energy Performance of Buildings Directive, CO₂ standards for cars and vans, and the EU Effort Sharing Regulation (ESR). Carbon pricing increases the effectiveness of these policies and also raises resources for their implementation.

Buildings and road transport sectors will need to increase the speed of emissions reductions by at least five times as fast as the current rates to remain under the ‘cap’ or the maximum number of pollution allowances (EU Allowances, EUAs) issued each year. The ETS2 emissions cap aims to result in a 42% reduction in the level of CO₂ vs 2005 levels by 2030.

This introductory guide provides an overview of ETS2 (Emissions Trading System for buildings and road transport) and the Social Climate Fund.