ETS2 for buildings and transport: the impact on gas, biomethane and bioCNG

ETS2 is a new, separate emissions trading system for CO₂ from fuel combustion in buildings, road transport and additional sectors (mainly small industry), in which allowances are surrendered by fuel suppliers, not by end consumers. According to the European Commission it is to be fully operational in 2028, although Directive (EU) 2023/959 assumed an earlier start. For natural gas this means a potential additional cost in the price; for biomethane and bioCNG — depending on the monitoring rules — a possible advantage.

What ETS2 covers

• Fuels and sectors. CO₂ from fuel combustion in buildings (heating), in road transport and in industrial sectors not covered by the existing EU ETS.
• Regulated entities. Fuel suppliers. They must hold a greenhouse gas emissions permit and an approved monitoring plan — the Commission gives 1 January 2025 as the deadline for obtaining them.
• Reporting. The annual emissions report is submitted by 30 April; from 2026 the data must be verified by an accredited verifier.
• Surrender. From 2028 suppliers surrender allowances corresponding to verified emissions by 31 May of the following year.

Timetable according to the Commission

Impact on gas, biomethane and bioCNG

The Commission's page does not state explicitly how ETS2 treats biomass, biogas and biomethane. In the EU ETS for installations, a zero emission factor applies to biomass meeting the sustainability criteria; do not automatically assume that identical rules and documents will apply to ETS2 — verify in the implementing legislation.

What this means for a biomethane producer and fleets

1. You are not regulated as a producer, but your counterparty — the gas supplier — is. Ask how it will document biomethane.
2. Prepare sustainability documentation (certificate, mass balance, guarantees of origin), because it usually decides whether quantities count as zero-emission.
3. Include ETS2 in the price model: contracts with an indexation clause relative to the natural gas price gain or lose on the additional cost.
4. bioCNG/bioLNG fleets can compare the cost of fossil fuel with ETS2 and of biofuel, but only after checking the accounting rules.
5. Track changes of deadlines. Directive (EU) 2023/959 provided for a start in 2027, and the Commission now points to 2028 — the schedule is sometimes corrected.

Typical misconceptions

• "ETS2 hits consumers directly" — fuel suppliers surrender the allowances, and consumers feel it in the price.
• "Biomethane is free of charges" — it depends on the monitoring rules and documents, not on the mere fact of biological origin.
• "ETS2 is the same as the EU ETS" — it is a separate system with separate allowances and entities.

Where ETS2 comes from and why

ETS2 was created as part of the "Fit for 55" package, to put a price on emissions not covered by the existing EU ETS (heating of buildings, road transport, small industry). Revenue from allowances is meant to serve, among other things, to soften the effects on households and small businesses — the Social Climate Fund, linked to ETS2, is intended for this purpose. For the fuel market it is important that the system works "upstream": the supplier pays for emissions and passes the cost on to customers in line with contracts and tariffs.

What to watch in the coming months

• Implementing deadlines. Permits, monitoring plans and suppliers' reports result from the directive and implementing acts; the Commission publishes guidance on its website.
• Allowance price. In the initial period a stabilisation mechanism operates: at a price above EUR 45 (in 2020 prices) additional allowances can be released from the reserve.
• Rules for accounting for biomass fuels. These will decide whether biomethane and bioCNG will in practice be exempt from the cost of allowances.
• Supply contracts. It is worth checking the clauses on changes in regulatory costs, because ETS2 may appear as a new component of the gas price.

Questions to the gas or fuel supplier

1. How does the supplier intend to show biomethane or bioCNG in its monitoring system?
2. Will the cost of ETS2 allowances be separated out in the price of natural gas?
3. Will contract prices be indexed for this cost, or will the supplier bear the risk until the end of the contract?
4. What sustainability documentation does it accept as the basis for counting the fuel as zero-emission quantities?

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