Auctioning is a transparent method used for allocating allowances within phase 3 (2013-2020) and phase 4 (2021-2030) of the EU Emissions Trading System (EU ETS), meaning that more and more companies subject to the EU ETS must buy an increasing proportion of allowances through auctions. The Member States auction their allowances according to the EU ETS Directive (Directive 2003/87/EC) and the Auctioning Regulation. The revenues from the auctioning of these allowances represent an increasing source of income for Member States.

Up to 2023, the EU ETS Directive (Article 10) provides that Member States should use at least 50% of auctioning revenues (or the equivalent in financial value) for climate and energy-related activities. In the revised EU ETS Directive adopted in 2023 (EU ETS Directive (2023/959)), the Member States are now requested to spend 100% of auctioning revenues for climate and energy (renewable energy and energy efficiency)-related activities .

What the data are telling us

  • The total revenues generated in the EU 27 from the auctions between 2013 and 2020 (Phase 3) exceed EUR 56 billion. In the first year of the phase 4 (2021-2030), the total revenues generated by EU 27 from auctions is EUR 25 billion. In 2022, the total revenues generated by EU 27 from auctions is EUR 30 billion.
  • Between 2013-2020, nearly 75% of the auctioning revenues were used by Member States for climate and energy related purposes, mainly within the EU, 76% for the years 2021 and 2022.
  • Over the years, most of the revenues generated have been used for domestic/EU climate and energy purposes (64% in 2022), while only a small fraction (1% in 2022) has been used for international climate and energy purposes to support developing countries in climate and energy actions.

The use of the auctioning revenues from ETS allowances contributes to the transition to a low carbon economy. Article 10 of the EU ETS Directive lists the climate and energy objectives and/or measures on which the revenues generated by Member States should be spent. Some of those objectives include the reduction of greenhouse gas emissions, the development of renewable energy sources, carbon capture and storage, energy efficiency improvement, a shift to low-emission and public forms of transport and measures to avoid deforestation. In addition, Article 3(d) of Directive 2008/101/EC provides that auction revenues from allowances for aviation can be spent for purposes other than those applying for the other auction revenues, such as in the fields of aeronautics and air transport to reduce emissions through low-emission transport.

Member States shall report on the amounts and the use of auctioning revenues since 2013 under Article 17 of the Monitoring Mechanism Regulation (MMR), following the format provided in Annex XIII of Implementing Regulation (EU) N° 749/2014. Those regulations have been repealed by the Regulation on the Governance of the Energy Union and Climate Action (2018/1999, Article 19) and the Implementing regulation 2020/1208 (Annex II).

The data shows that Member States spend most of the revenues generated by auctioning for domestic/EU climate and energy purposes and that deployment of renewable energy is the most important revenue use, followed by spending on energy efficiency and sustainable transport. Internationally, auctioning revenues from ETS allowances represent one of the financing streams supporting international climate finance. Member States channel revenues to multilateral financial, institutions and programmes (e.g. by contributing to the Green Climate Fund) or use revenues bilaterally.

According to Article 19 of the Regulation on the Governance of the Energy Union and Climate Action, Member States are required to report on financial and technology climate-specific support provided to developing countries. The reported information relates to the support provided to developing countries for mitigation, adaptation, capacity-building and technology transfer. The funds reported as targeting international climate finance can include auctioning revenues from ETS allowances.