ETS and biogas plants: do you need to buy CO₂ emission allowances

A typical biogas plant does not buy CO₂ emission allowances: the EU ETS covers fuel combustion installations with a total rated thermal input above 20 MW, and agricultural biogas cogeneration is many times below this threshold. In addition, emissions from biomass and biogas meeting the sustainability criteria are treated as zero in the ETS. Biogas plants feel the ETS mainly indirectly — in energy prices.

Who the EU ETS covers

Directive 2003/87/EC covers the list of activities in Annex I. For the power sector the key one is the combustion of fuels in installations with a total rated thermal input (in the fuel) above 20 MW. The capacities of individual units in one installation are added together — several engines on one site count together. Excluded from this scope are installations for the incineration of hazardous and municipal waste, which have separate rules. The operator of an installation covered by the system must have an emissions permit and a monitoring plan, report verified emissions and surrender allowances for every tonne of CO₂. In Poland, tasks related to the ETS are performed by, among others, KOBiZE on the basis of the Act of 12 June 2015 on the system of greenhouse gas emission allowance trading.

Order of magnitude. A cogeneration engine with an electrical capacity of 1 MW at an electrical efficiency of about 40% draws about 2.5 MW in the fuel. The 20 MW threshold is therefore about eight times higher — this is an illustration, not a rule, because what counts is the rated thermal input in the fuel.

Why biomass and biogas are zero-emission

In the ETS, CO₂ emissions from biomass meeting the sustainability and greenhouse gas reduction criteria do not require the surrender of allowances — in line with Commission Implementing Regulation (EU) 2018/2066 on monitoring and reporting of emissions, a zero emission factor is then applied (the detailed conditions, including for smaller installations, are set out in that regulation and in Commission guidance). The criteria come from the RED II Directive: for biogas they apply in installations with a total rated thermal input from 2 MW, for solid biomass fuels — from 20 MW.

Where the ETS may nevertheless concern biogas plants

• Large energy complexes with many units, in which biogas is one of the fuels: coverage is decided by the sum of the capacities of all combustion units.
• Burning biogas alongside fossil fuels in the same installation above the threshold: part of the emissions from fossil fuels is accounted for.
• Your own boiler house or cogeneration unit fuelled by natural gas on the site of a processing plant — coverage is decided by the total capacity.

Indirect impact

How strong this impact is depends on the market and the contracts; it is not assumed in any regulation.

ETS2 — a separate system from 2027

Directive (EU) 2023/959 of 2023 introduces ETS2: a system for fuels used in buildings, road transport and additional sectors, in which the entities placing fuels on the market are regulated. Monitoring is to start earlier, and payments for emissions — from 2027. For biogas plants ETS2 will be significant indirectly: through natural gas and fuel prices, and not as an obligation of the producer.

What to do first

1. Add up the rated thermal input of all combustion units on one site.
2. If you are below 20 MW — record the justification and monitor changes (expansion, adding boilers).
3. Take care of documentation of the sustainability of biomass and biogas if the installation has a thermal input of at least 2 MW.
4. When planning an expansion, re-check the threshold before the investment decision.

Three things that are often confused

• The ETS is not a tax on every emitter. It covers selected activities from Annex I above the thresholds, not everyone who burns fuel.
• A zero emission factor for biomass does not mean no obligations in an installation covered by the system. The operator still reports verified emissions, and surrenders allowances for emissions that are not zero.
• CO₂ from upgrading biogas to biomethane comes from biomass. Its treatment depends on the rules on emissions monitoring, and the upgrading installation itself is not an activity from Annex I.

Where funds from allowances go to Polish projects

Part of the revenue from the sale of allowances feeds the Modernisation Fund, from which, among other things, investments of grid operators may be co-financed. For the owner of a biogas plant this is an indirect channel: they benefit from a better-developed grid, but there is no producer's obligation behind it.

When the calculations are not obvious

1. Many units on one site. The capacities of engines, boilers and other combustion units are added together.
2. A gas boiler house supporting the biogas plant. If a drying unit or boiler house runs on natural gas, its capacity goes into the sum.
3. A change of fuel. Switching from biogas to natural gas during failure periods may change the classification of emissions.
4. Rated versus actual capacity. What counts is the rated thermal input in the fuel, not the average load.

This text is for information purposes and does not constitute legal advice; before an investment or formal decision, check the current wording of the regulations and consult a lawyer or the competent authority.