ETS2 Explained - Who's Impacted and How?

The European Union's Emissions Trading System 2 (ETS2) is set to become a landmark shift in climate regulation.

Unlike the original ETS, which focused on heavy industry and power generation, ETS2 targets a broader swath of the economy.

Buildings, road transport, and select fuels—with significant implications across multiple industries.

The ETS2 will only impact organisations in the EU, that is until the UK and EU ETS are linked at some point in the near future.

Information on this can be found, here.

This article offers a clear, actionable overview of what ETS2 means for different sectors, with an emphasis on how it will impact specific types of businesses and the individuals, sustainability officers, CFOs and operations managers, who will need to respond...

What Is ETS2?

ETS2 is the EU’s new emissions trading system, due to launch in 2028 following a year-long delay.

It extends the carbon pricing model to new sectors, which have not been impacted by existing ETS regulations.

• Road transport fuels (gasoline, diesel)

• Heating fuels for buildings (natural gas, oil, coal)

Under ETS2, fuel suppliers must buy and surrender allowances for the carbon content of fuels they sell.

These costs are expected to be passed downstream to businesses and consumers, effectively putting a price on carbon across the broader economy.

There will be a price cap of €45 per tonne of CO2 in the initial years, but the system is expected to tighten over time, with fewer free allocations and greater demand increasing the price of allowances.

Who Will ETS2 Affect?

ETS2 affects every business and institution that relies on fossil-based heating or transportation, directly or indirectly.

Below are sector-specific breakdowns.

Real Estate & Property Management

Commercial property operators will face higher heating costs, especially those using oil or gas boilers.

Multi-family housing companies and public housing agencies must prepare for rising costs passed on by utility providers.

Building developers will see higher compliance expectations and lower ROI for carbon-intensive heating.

Affected roles: Facilities managers, energy managers, procurement officers

Logistics, Freight & Fleet Management

Hauliers and freight companies that use diesel vehicles will face increased fuel costs.

Courier and delivery services (e.g. parcel delivery) will see operating costs rise.

Municipal transport fleets (public buses, maintenance vehicles) must prepare to decarbonise or absorb additional costs.

Retail Chains & Franchises

Supermarkets, big-box retailers, and QSR chains with large vehicle fleets or gas-heated stores will experience margin pressure.

Franchise operators may be disproportionately affected if unable to negotiate better energy contracts or retrofit systems.

Manufacturing & Industrial SMEs

While many large manufacturers are already regulated under ETS1, small to mid-sized manufacturers (e.g. food processors, furniture makers, metal shops) may face new energy price volatility.

Any business operating its own heating systems or logistics may be affected.

Affected roles: Plant managers, energy procurement leads

Energy Providers and Fuel Distributors

Fuel importers and distributors will bear the legal responsibility to buy and report carbon allowances.

These businesses must set up allowance tracking and emissions accounting systems.

Aviation, Maritime, and Private Transport Services

ETS2 introduces indirect pressure on private aviation, charter yachts, and business transport firms that rely on high-emissions fuels.

Even though commercial airlines remain under ETS1, ground transportation, private transfers, and niche operators fall under ETS2 when using taxed fuels.

Affected roles: Fleet owners, airline sustainability teams, yacht and jet service operators

What Should your Business do now?

Identify Exposure

Audit your business’s use of heating and transport fuels and identify which parts of your operations rely on fossil-based inputs, as a priority. 

You should find out if your supplier is already subject to ETS1 or ETS2 and ask about their long-term compliance strategy. If they're unsure, get in touch with CFP Energy for immediate support, here.

You may be liable for significant fines if you are using energy that has been generated using traditional fuels and is not ETS compliant.

Engage Internally

Operations leaders, procurement officers, and sustainability professionals should coordinate to model expected cost impacts under €45+/tonne CO2 scenarios.

This should be the baseline calculation and the absolute minimum you can expect to pay for ETS2 compliance.

Decarbonise where Possible

Your priority should be to decarbonise where you can, as this will provide actual carbon reductions at source. Investments in your own renewable energy generation, efficient technology, alternative fuels such as biofuels and electrification of your fleet (if you're part of the road transport and logistics sector) should be a top priority.

Track Policy Developments

ETS2 will evolve rapidly as exemption rules, price caps, and auction mechanisms are still in motion.

Keeping track of consultations and price changes will be fundamental for your success in the ETS era. If you're based in the UK, we have a dedicated consultation and documentation hub, here.

We also have a full timeline with changes across every sector, here.

Assign someone to track EU ETS2 regulatory updates at the national level will be critical for your compliance, but if you do not have the adequate resource, CFP Energy has an award-winning team of ETS specialists who can provide you with weekly updates. Enter your details and request to join the ETS market report list, here.

A Wake-Up Call for Carbon Cost Accounting

ETS2 is not just a climate regulation, it’s a new cost structure for the economy.

Businesses that prepare early by reducing fossil reliance and internalising carbon costs, will be far better positioned in the years ahead.

If you manage energy, fleets, procurement, or sustainability within your organisation, the time to secure your long-term ETS2 strategy, is now.

Connect with our team to get started, here.