Climate action – binding annual greenhouse gas emission reductions (2021–2030)

SUMMARY OF:

Regulation (EU) 2018/842 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement

WHAT IS THE AIM OF THE REGULATION?

The regulation, known as the effort sharing regulation (ESR), as amended by Regulation (EU) 2023/857, aims at reducing greenhouse gas (GHG) emissions* from the following sectors: domestic transport (excluding aviation), buildings, agriculture, small industry and waste. These sectors account for almost 60% of emissions in the European Union (EU).
For that purpose, the regulation establishes 2030 targets for the reduction of GHG emissions in the EU Member States. It also sets out the rules on defining annual GHG emission limits, expressed in annual emission allocations, for the years 2021–2030 that progressively lead to the abovementioned targets. The ESR is part of a set of policies and measures to reduce the EU’s emissions by at least 55% by 2030 as required by Regulation (EU) 2021/1119, the European Climate Law (see summary), which made the EU’s climate neutrality target by 2050 legally binding.

KEY POINTS

Not all Member States have the same 2030 target. The ESR distributes the burden of GHG emission reduction in accordance with fairness and cost-effectiveness considerations.

By 2030, Member States must reduce their 2005 GHG emission levels in accordance with the percentages set out in column 2 of Annex I, which range from 10% (Bulgaria) to 50% (Denmark, Germany, Luxembourg, Finland and Sweden).

The European Commission is empowered to adopt implementing acts setting out Member States’ individual annual emission allocations (AEAs) for the years 2021–2030, expressed in tonnes of CO₂ equivalent, in accordance with the linear trajectories set out in the regulation. Given that the 2030 targets and the system of trajectories leading to them were amended in 2023, the Commission will, in 2023, amend Commission Implementing Decision (EU) 2020/2126 to update the number of AEAs assigned to Member States in the years 2023–2030.

Flexibility rules in the amended regulation allow Member States to:

borrow, within certain limits, AEAs from the following year to cover excess emissions in a given year;
bank, under certain conditions, the surplus of AEAs for use in a subsequent year;
transfer up to 10% (in the years 2021–2025) and 15% (in the years 2026–2030) of their annual allocations to another Member State;
offset, subject to certain conditions, any excess in their emissions with GHG removals from land use, land use change and forestry (governed by the LULUCF regulation).

Nine Member States (listed in Annex II: Belgium, Denmark, Ireland, Luxembourg, Malta, Netherlands, Austria, Finland and Sweden) may cancel a limited percentage of their emissions trading system allowances, up to a combined maximum of 100 million tonnes of CO₂ equivalent, in order to compensate for an excess of emissions in the ESR sectors. Member States must notify the Commission by 31 December 2023 if they intend to make use or further use of the limited cancellation of emissions trading system allowances.

The Commission will carry out compliance checks in 2027 (covering emissions in 2021–2025) and 2032 (covering emissions in 2026–2030). If these checks show that, in a given year, after using the abovementioned flexibilities, a Member State does not have enough emission allocations to cover all its GHG emissions, the amount of emissions in excess will be multiplied by 1.08 and the result will be added to the emissions generated in the subsequent year.

Member States which meet certain gross domestic product and GHG emissions criteria may receive a limited number of allocations from a safety reserve containing up to 105 million tonnes of CO₂ equivalent to compensate for the emissions they may produce in excess of their 2030 targets.

The Commission:

adjusts and publishes the annual emission allocations for each Member State;
ensures accurate accounting, through the Union Registry, of compliance with the regulation’s rules;
keeps the regulation under review and presents a report to the European Parliament and the Council of the European Union within 6 months of each global stocktake under the Paris Agreement (see summary); this report will include, in particular, an assessment of the need for additional EU policies and measures in view of the necessary GHG emission reductions in a post-2030 framework, and may be accompanied, if appropriate, by legislative proposals.

Regulation (EU) 2018/842 also amends Regulation (EU) No 525/2013, which was subsequently repealed and replaced by Regulation (EU) 2018/1999 – see summary).

FROM WHEN DOES THE REGULATION APPLY?

Regulation (EU) 2018/842 has applied since 9 July 2018.

Amending Regulation (EU) 2023/857 has applied since 16 May 2023.

BACKGROUND

The regulation is a further step towards meeting the EU’s previous commitment under the Paris Agreement to reduce GHG emissions by at least 40% by 2030 compared with 1990 levels.

The sectors covered by the regulation cover almost 60% of total domestic EU emissions.

For further information, see:

Effort sharing 2021–2030: targets and flexibilities (European Commission).

KEY TERMS

Greenhouse gas emissions. Emissions from carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride and sulphur hexafluoride.

MAIN DOCUMENT

Regulation (EU) 2018/842 of the European Parliament and of the Council of 30 May 2018 on binding annual greenhouse gas emission reductions by Member States from 2021 to 2030 contributing to climate action to meet commitments under the Paris Agreement and amending Regulation (EU) No 525/2013 (OJ L 156, 19.6.2018, pp. 26–42).

Successive amendments to Regulation (EU) 2018/842 have been incorporated into the original text. This consolidated version is of documentary value only.