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EU plans early auction of carbon credits to support emissions reductions

The European Union (EU) is set to auction its carbon credits earlier than planned this year, beginning in July. This decision aims to raise additional funds to help member states reduce emissions and shift away from reliance on Russian gas, according to the European Commission (EC).

EU plans early auctions of carbon credits to boost climate action and energy transition_visual 1

The EU Emissions Trading System (EU ETS) is the world's largest carbon market, covering nearly 40% of total EU emissions. The bloc seeks to generate €20 billion ($21.62 billion) in grants from its carbon market, with €8 billion coming from the early sale of EU carbon credits and permits. The remaining €12 billion will be sourced from a carbon market fund, which will commence once the EU revises its law on carbon market auctions to reflect new volumes.

The EC reported there are about 16.5 million additional carbon credits up for auction early this year. The early sale of these credits will help replenish the EU carbon fund, enabling member states to invest in renewable energy, energy-saving renovations, and support heavy industries' decarbonisation.

Read more: EU’s deforestation regulations

In December 2022, the EU agreed to reform its carbon market, with three main goals: to accelerate emissions cuts, phase out free allowances for industries, and target fuel emissions from the building and road transport sectors. The bloc increased its original 55% emissions reductions target for 2030 (relative to 1990) to 62% from 2005 levels. Industries under the EU ETS must reduce their emissions by that amount.

The EU's primary policy for reducing emissions is to make power plants and factories pay for their pollution by buying carbon credits. The recent surge in EU carbon prices, which reached over €‎100 per tonne in February, increases costs for industries but also creates opportunities to invest in green technologies.

As part of its Green Deal Industrial Plan, the EU proposed the Net-Zero Industry Act to ramp up clean technology manufacturing and make the bloc's energy system more secure and sustainable during the transition. The EC plans to sell 27 million carbon credits from a reserve to replenish the EU carbon fund, with equal volumes of carbon credits to be sold by August 2026.

The demand for carbon credits is steadily increasing as the offer for such products remains more scarce. The net effect will be increased prices for carbon credits, and as long as their quality remains high, the market will experience steady growth. The projects developed by DGB Group follow the most rigorous standards to ensure they benefit all stakeholders, from investors to land owners, and generate high-quality carbon credits that help organisations offset their carbon emissions.

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