Technical guidance on carbon credits, EU ETS, voluntary carbon markets, and blockchain carbon market innovation for Ireland and the EU.
Carbon Markets | EU Climate Policy | Ireland
Meta Description: EU ETS Phase 4 explained for Irish businesses by Michael English (IMPT.io CTO). Fit for 55 changes, CBAM, free allocation phase-out, and what Irish companies must prepare for.
Target Keywords: EU ETS Phase 4 Ireland, EU carbon market explained, ETS compliance Irish businesses, European carbon trading scheme Ireland, CBAM Ireland, Michael English EU ETS
The European Union Emissions Trading System (EU ETS) is undergoing its most significant reform since launch. EU ETS Phase 4 (2021–2030), significantly reshaped by the Fit for 55 package passed in 2023, introduces tighter caps, accelerated free allocation phase-out, and the Carbon Border Adjustment Mechanism (CBAM). Every Irish business with EU ETS compliance obligations — and many that don't currently have them but import from outside the EU — needs to understand these changes.
The EU ETS is a "cap-and-trade" system: the EU sets a maximum (cap) on total greenhouse gas emissions from covered sectors. Regulated entities — power generators, industrial facilities, airlines — receive or buy permits (European Union Allowances, EUAs) and must surrender one EUA for every tonne of CO₂ equivalent they emit.
If a company emits less than its allocation, it can sell surplus EUAs. If it emits more, it must buy additional EUAs. This creates a market price for carbon emissions.
Current coverage (as of 2024):
Ireland-specific coverage: ESB, Bord na Móna, and major industrial emitters across IDA-supported industries are covered entities. The Irish cement sector (ECOCEM, CRH, Irish Cement/Lagan) is directly exposed.
The most fundamental change is the steepening of the annual emissions cap reduction:
| Period | Linear Reduction Factor (LRF) |
|---|---|
| Phase 3 (2013-2020) | 1.74% per year |
| Phase 4 initial (2021-2023) | 2.2% per year |
| **Phase 4 revised (2024-2027)** | **4.3% per year** |
| Phase 4 revised (2028-2030) | 4.4% per year |
This means the EUA supply is shrinking twice as fast as before 2024. The supply reduction drives higher long-run carbon prices.
Free allocation of EUAs to industry (designed to prevent carbon leakage when the policy was new) is being phased out as CBAM takes over the carbon leakage protection function:
| Year | Free Allocation (% of benchmark entitlement) |
|---|---|
| 2024 | 97.5% |
| 2026 | 90% (first year of CBAM transition reporting) |
| 2028 | 70% |
| 2030 | 50% |
| 2034 | 0% (full CBAM implementation) |
Impact for Irish industry: Companies that currently receive substantial free allocation will face increasing compliance costs as free allocation shrinks. A cement plant receiving €10M of free EUAs today will receive nothing by 2034.
A second, entirely separate EU ETS ("ETS 2") covering buildings, road transport, and small industry will launch in 2027. This is separate from the main ETS and will directly affect:
ETS 2 creates a "carbon cost" for sectors previously outside the EU ETS. The Central Bank of Ireland has assessed that ETS 2 will add approximately €0.25-€0.40/litre to heating oil and diesel prices by 2030.
Phase 4 removes the aviation sector's temporary derogation for extra-EEA flights. From 2024:
Ireland's aviation exposure: With Ryanair, Aer Lingus, and Dublin Airport's hub status, Irish aviation is significantly exposed to ETS aviation costs. Ryanair, as Europe's largest airline, is one of the largest ETS compliance buyers in the aviation sector.
CBAM is the most significant new development in EU carbon market policy and has major implications for Irish importers.
From 2026, companies importing into the EU the following product categories must purchase CBAM certificates equal to the carbon content of their imports:
Phase 1 CBAM products (from 2026):
Transitional period (2023–2025): Reporting only — no financial obligation, but importers must measure and report the embedded carbon in covered imports.
The CBAM certificate price is set weekly based on the average clearing price of EUAs in the previous week. If a company imports 1,000 tonnes of steel from a country with no carbon pricing, it pays:
CBAM cost = embedded carbon content (tCO₂e/tonne) × tonnes imported × EU ETS price
For steel with an average carbon intensity of 1.9 tCO₂e/tonne, importing 1,000 tonnes at an EUA price of €70:
CBAM certificates needed = 1,900 tCO₂e × €70 = €133,000
Countries with carbon pricing equivalent to the EU ETS receive credit against their CBAM obligation. Currently, only Switzerland has a linked ETS that qualifies. UK ETS (post-Brexit) is a candidate but not yet linked.
Irish companies importing the Phase 1 CBAM products from non-EU, non-ETS countries (including UK post-Brexit) face new compliance obligations:
Compliance requirements from 2024 (transitional reporting):
Understanding EUA price drivers is essential for procurement and hedging decisions:
Various energy research houses forecast EUA prices ranging from €80–€200 by 2030 depending on policy ambition, economic conditions, and renewable deployment pace. The consensus view is structurally higher prices driven by tighter supply.
All EU ETS transactions are recorded in the EU Transaction Log, maintained by the European Commission. Irish participants access this through:
| Date | Obligation |
|---|---|
| 28 February annually | Emissions report submission (using Verified Annual Emission Report) |
| 31 March annually | Verified emissions report submission to EPA |
| 30 April annually | EUA surrender equal to verified previous-year emissions |
| Ongoing | Registry account updates for transactions, surrenders |
Verification requirement: Emissions reports must be verified by an accredited verifier (see EN ISO 14065 and EMAS accreditation). The EPA publishes a list of Irish accredited verifiers.
Missing EUA surrender obligations triggers automatic penalties:
EU ETS Phase 4, transformed by Fit for 55, is creating a fundamentally different carbon compliance landscape for Irish businesses. Higher prices, faster cap tightening, free allocation phase-out, and the new CBAM mechanism collectively increase both the cost and complexity of ETS compliance.
For Irish industrial and aviation sectors, early preparation — modelling exposure, establishing EUA procurement strategies, and engaging with CBAM transitional reporting — will substantially reduce costs and compliance risk compared to reactive management.
The carbon price is not going back to where it was. The EU's climate commitment is legally binding. The businesses that plan ahead will outperform those that don't.
Michael English is Co-Founder & CTO of IMPT.io, an EU-focused blockchain carbon credit platform. He tracks EU ETS developments for Irish business audiences. Based in Clonmel, Co. Tipperary, Ireland.
Keywords: EU ETS Phase 4 Ireland, EU carbon market Irish businesses, CBAM Ireland importers, European carbon trading system Ireland, ETS Fit for 55 Ireland, EUA price forecast 2025, Michael English EU ETS