Under the EU’s upcoming Emissions Trading System for buildings and road transport (ETS2), energy suppliers will be required to pay for every tonne of emissions in these sectors. ETS2 revenue is expected to generate between €342 billion and €570 billion by 2032, which member states must invest in climate change mitigation and social cushioning measures. 

How can national governments use their share of revenue to support an ambitious and equitable path to decarbonisation?

Revenue use from ETS1 – which already covers emissions from the sectors of electricity and heat generation, energy-intensive industries, aviation, and maritime transport – can help shed light on this issue.

What can we learn from ETS1 revenue investments?

This is the central research question of a new study by Reform Institute, commissioned by Germanwatch under the LIFE Effect project. The study investigates how revenue from ETS1 has been invested in the five countries with the most emissions in the ETS2 sectors: Germany, Poland, Spain, Italy, and France. Using a mixed-methods approach – combining quantitative data analysis, stakeholder interviews, and comparative policy evaluation – the research offers robust insights into spending patterns, climate impact, and policy effectiveness. The study identifies good practices and provides policy recommendations to guide future investments under ETS2 and the Social Climate Fund.