Report on the functioning of the European carbon market

Summary:

Annual report published by the European Commission on 23 November 2017, setting out the latest developments in the European carbon market.

Further information:

As stipulated by the Directive 2003/87/EC (also known as EU ETS Directive), the objective of this report is to provide a snapshot of developments in the European carbon market on an annual basis. The report covers the year 2016, but also presents certain initiatives proposed or agreed in 2017. Compared to the previous report, it contains a new chapter on indirect carbon cost compensation schemes, as well as information on the Market Stability Reserve surplus indicator.

In 2016, the EU ETS remained the EU's flagship tool for tackling climate change in a cost-effective way. The system delivered emission reductions of 2.9% from participating installations, marking a decreasing trend in emissions since the start of Phase 3, while the surplus of allowances in the carbon market fell to its lowest level since the start of the current trading period.