Emissions covered by the EU emissions trading system fell by 5% in 2024 compared with 2023, according to data reported by member states by the 31 March 2025 deadline and published by the European Commission on 4 April. The figure covers stationary installations and aircraft operators. The Commission said emissions in the sectors covered by the system are now around 50% below 2005 levels and on track for the 2030 target of a 62% reduction.
The power sector was again the main driver. Emissions from electricity production fell by 12% compared with 2023. The Commission attributed the fall to an 8% increase in electricity production from renewables and a 5% increase in nuclear output, together with an 8% decrease in gas-fired generation and a 15% decrease in coal-fired generation. Solar output rose by 19%, and hydropower also increased. Wind generation was broadly stable despite less favourable weather in parts of the year. Total electricity production was similar to 2023.
Industry and aviation
The Commission's early release focused on the power sector, and detailed figures for industrial sectors will follow in its annual carbon market report. Industrial emissions fell sharply in 2022 and 2023 as high energy prices cut output in energy-intensive industries such as chemicals, steel and fertilisers, and the pace of any recovery in those sectors is one of the main uncertainties for allowance demand.
Aviation emissions within the scope of the system rose, reflecting continued recovery in air travel. The figures are also the first to reflect the inclusion of maritime transport, which joined the system from 2024, with shipping companies required to surrender allowances for a share of their emissions that rises over three years.
Hydro and nuclear recovery
Two of the factors behind the power sector decline were the recovery of French nuclear output and higher hydropower generation across much of Europe. Both had been depressed in 2022, when a drought cut hydro output in southern Europe and the Alps and stress corrosion problems took a large part of France's nuclear fleet offline. The recovery in 2023 and 2024 reduced the need for gas and coal generation to fill the gap.
That pattern links the carbon market directly to weather and climate conditions. Hydropower output in any given year depends on rainfall and snowmelt, and nuclear output in summer can be constrained by river water temperatures. A drier or hotter year can therefore raise emissions in the power sector even without any change in policy or capacity.
The solar effect
The 19% rise in solar generation reflects continued rapid installation of solar panels across the EU, both on rooftops and in utility-scale projects. Solar output peaks in the middle of the day in summer, which displaces gas generation during those hours and pushes wholesale prices down, sometimes below zero. The growth of solar has also increased the value of flexible resources such as batteries, pumped hydro and demand response that can shift consumption or generation into evening hours.
For the carbon market, more solar means fewer emissions from gas plants during daylight hours, but it does not by itself remove the need for dispatchable generation at night and in winter. The balance between solar growth, storage and gas generation will continue to shape power sector emissions over the rest of the decade.
Allowance prices and the market balance
EU allowance prices in 2024 were lower than the peaks reached in 2023, reflecting weaker demand from both power and industry. Lower emissions reduce demand for allowances, while the market stability reserve removes surplus allowances from circulation. The ongoing reduction in the cap, which has been tightened under the Fit for 55 reforms, will gradually reduce supply.
From 2026, free allocation to industrial sectors covered by the EU carbon border adjustment mechanism will start to fall, which will increase the number of allowances those sectors need to buy. Analysts generally expect that to support prices in the second half of the decade, although the timing and size of the effect depend on industrial output and the pace of decarbonisation.
Revenue
The emissions trading system also generates significant revenue for member states and EU funds. Most revenue from auctions goes to national budgets, with the remainder going to the Innovation Fund and the Modernisation Fund. EU rules require member states to use their revenues for climate and energy purposes. The Commission's annual carbon market report will provide full figures for 2024 later in the year.
A separate system for buildings and transport
A second emissions trading system covering fuel for buildings and road transport, known as ETS2, is scheduled to start in 2027. It will put a price on emissions from heating fuels and road fuels, which are currently priced through national taxes and, in some countries, national carbon pricing schemes. Some member states have called for delays or changes, citing the potential effect on household energy bills. A Social Climate Fund financed from ETS2 revenue is intended to support vulnerable households.
What it means for energy markets
The 2024 data show that the EU's carbon market is increasingly a story about the power sector's fuel mix. When renewables and nuclear output rise and gas and coal fall, emissions drop sharply. When weather reduces hydro or wind output, or when nuclear availability falls, emissions can rise. This makes the carbon price sensitive to the same factors that move power prices: gas prices, weather and the availability of low-carbon generation.
For gas markets, lower power sector demand for gas in 2024 was one factor helping Europe rebuild storage after the 2022 crisis. For coal, the 15% fall in coal generation continues a long decline, with several member states having closed their last coal plants or set closure dates.
The coal exit in numbers of countries
Several EU member states no longer burn coal for power, and others have set closure dates within the decade. Germany, Poland and the Czech Republic remain the largest coal users in the EU power sector, and their generation mix accounts for a large share of the remaining power sector emissions under the system. Changes in German lignite output in particular can move EU-wide power emissions noticeably in a single year.
What to watch
The Commission's full carbon market report later in 2025 will provide final figures by sector and country. The next major policy milestones are the 2040 climate target proposal, the review of the market stability reserve and the start of ETS2. In the power sector, the summer of 2025 will show whether hydro and nuclear output stay strong or whether heat and drought reduce them.