25. May 2021
The ETS is a cap-and-trade system where companies must purchase allowances for each tonne of CO₂ they emit. The total number of allowances is capped, decreasing over time to encourage emission reductions. Companies that emit less than their allowances can sell the surplus, while those exceeding their limits must buy additional allowances or face penalties.
Under the Fit for 55 package, the EU aims to achieve a 55% reduction in GHG emissions by 2030 compared to 1990 levels. To meet this goal, the ETS will be expanded to cover emissions from road transport and buildings, creating a new ETS sector often referred to as “ETS2”.
Key features of ETS expansion:
Inclusion of fuel suppliers
Fuel suppliers, rather than individual vehicle operators, will be required to purchase allowances for the emissions associated with the fuels they sell.
This additional cost is expected to be passed down to consumers, meaning higher fuel prices for hauler companies.
Pricing carbon emissions
The expansion introduces a carbon price for road transport fuels, making fossil fuels like traditional diesel more expensive and incentivising the use of renewable alternatives.
Estimates suggest an increase of 10-to-12-euro cents per liter of diesel by 2030 due to ETS2.
Gradual implementation
The new system is expected to be operational by 2027, giving businesses time to adapt.
Higher fuel costs
The ETS will increase the cost of fossil fuels, as suppliers pass on the expense of purchasing allowances to consumers. This creates an immediate financial incentive to switch to lower-emission fuels.
Pressure to decarbonise supply chains
Businesses with significant transport operations will face pressure to reduce their carbon footprint, particularly Scope 3 emissions, as customers and regulators demand greater transparency and sustainability.
Increased operational costs for logistics providers
Since fuel is one of the largest cost factors for haulers (often accounting for 20% – 30% of total operating expenses), rising fuel prices will directly increase operating costs. This may lead to price increases for goods and services.
While renewable fuels like HVO are widely available, infrastructure for electric or hydrogen-powered heavy vehicles is still underdeveloped in many regions. Higher fuel prices may strain budgets, particularly for businesses operating on thin margins. Managing these costs while remaining competitive will be a key challenge. The introduction of ETS2 adds another layer of regulation for businesses to navigate, requiring greater focus on compliance and reporting.
Larger corporations and supply chain partners are already under pressure to reduce Scope 3 emissions, so they may prefer haulers that demonstrate low-carbon operations. Transport customers may demand proof of emission reductions to meet their own sustainability targets. The ability to provide CO₂ reduction data through platforms like Biofuel Express Insight will become increasingly important for winning contracts.
Renewable fuels like Hydrotreated Vegetable Oil (HVO) offer an immediate solution for businesses looking to mitigate the impact of ETS expansion:
At Biofuel Express, we are committed to helping businesses navigate the challenges and opportunities of the ETS expansion:
Reliable access to renewable Fuels
We provide high-quality HVO available across Denmark, Sweden, Norway, Germany, and Austria.
Expert guidance
We offer tailored advice on transitioning to renewable fuels and navigating the complex regulatory landscape.
Tools for emission tracking
Our solution called Biofuel Express Insight help businesses measure and report CO₂ savings, simplifying compliance with current and future legislation.
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