European Commission Reports 1.6% Fall in EU Emissions and 11% Rise in Carbon Revenue

By The Edge Research Team

The Takeaway: EU net greenhouse gas emissions fell 1.6% in 2025 on provisional data, the European Commission’s 2026 climate reports show. They are 39% below 1990 levels while the economy is 74% larger. Nine member states are not making sufficient progress. Carbon market auction revenue rose 11% to €43.2 billion. Member states spent €13.5 billion of the revenue they reported for climate action within the year.

The EU needs to cut emissions by an average of 153 million tonnes a year to reach its 2030 target, the Commission’s progress report says, after reductions slowed in 2025.

For EU governments and industry, the reports set the scale of the task for the rest of the decade and show where carbon market money goes. In The Edge’s reading, the 2030 gap sits outside the carbon market.

The report finds emissions under the EU Emissions Trading System (ETS) below the cap and aligned with their goal of a 62% cut by 2030 from 2005. Effort sharing emissions, by contrast, are projected to fall about 1.5 percentage points short of their 40% target, counting member states’ planned measures. Under current policies, the report puts that shortfall at around 8 percentage points.

Emissions Fall 1.6% in 2025 but the Pace Slows

The 2026 EU Climate Action Progress Report shows net greenhouse gas emissions fell 1.6% in 2025 from 2024, on provisional data. Emissions are now 39% below 1990 levels, while the economy has grown 74% over the same period.

ETS emissions fell 2%, while those in the effort sharing sectors (domestic transport, buildings, agriculture and waste) were broadly stable. The greenhouse gas intensity of the economy fell 2.7%, and net carbon removals by land rose around 11%.

The pace of cuts slowed. The slower ETS decline appears mainly to reflect greater use of gas to meet peak demand as variable renewable output rises, and wider electrification of industry and transport, the report says. Gas power generation rose 12% across the EU in 2025 after shortfalls in hydro and wind output, according to the progress report.

To stay on track for a 55% cut by 2030, the EU would need to reduce emissions by an average of 153 million tonnes of CO2 equivalent a year from 2026 to 2030, the report says. Effort sharing emissions are expected to fall around 38.5% by 2030 from 2005, short of the 40% target.

Nine member states are not making sufficient progress: Austria, Croatia, Cyprus, Germany, Italy, Ireland, Lithuania, Malta and Sweden. The Commission will ask each to submit a corrective action plan.

Clean technology deployment kept growing. Battery electric car registrations rose to 1.9 million, which the report puts at roughly one in six new cars.

Wind and solar capacity reached 611 GW, around 49% of total electricity generation capacity. Around 260 GW of it has been added since 2021.

The target of a 90% cut in net emissions by 2040 from 1990 became law when the amended European Climate Law entered into force in April 2026.

EU emissions and carbon market, 2025

Figures from the 2026 EU Climate Action Progress Report and Carbon Market Report, published 9 November 2026; 2025 net emissions and land removals are provisional; the share of revenue is computed from the two revenue figures.

Carbon Market Revenue Rises 11% to €43.2 Billion

ETS revenue grew to €43.2 billion in 2025, an 11% increase on 2024. More than half, €23.9 billion, went directly to national budgets, a share of 55.3%. Member states must use all their ETS revenue, or an equivalent amount, for climate action and energy transformation, with aid to electricity-intensive industries as the only exception.

Member states have reported on €21.1 billion of that sum. Of it, €5.1 billion compensated electricity-intensive industries for indirect carbon costs, leaving €16.0 billion for climate action and energy transformation.

Of that €16.0 billion, €13.5 billion was spent in 2025, as the revenue may be used over several years. On those figures, 84.4% of the money reported for climate action was spent within the year. Italy and Cyprus, which collected €2.7 billion between them, have not yet reported.

In their reports, member states directed 40% of their 2025 ETS revenues to renewables, grids and storage, and 18% to clean public transport and mobility. Another 11% went to energy efficiency in industry and buildings.

Since 2013, the ETS has raised over €288 billion through auctions, as of mid-October 2026. Compliance among companies in the system was 99.5% over the past year.

ETS emissions remain below the cap, though reductions have slowed compared with previous years. In July 2026, the Commission proposed a reform of the system for 2030 to 2040, including an Industrial Decarbonisation Bank that aims to mobilise €100 billion.

A separate system, ETS2, will cover fuel used in buildings, road transport and industry outside the current system, around 40% of EU greenhouse gas emissions. It aims to cut those sectors’ emissions by 42% by 2030 from 2005, with auctions starting in 2027. In line with the European Council’s conclusions of 15 to 16 October, the Commission is updating its assessment of ETS2’s impacts, including its design and safeguards.

Energy Shock Adds Around €100 Billion to the Import Bill

Since the start of the 2026 energy shock, imported fossil fuels have cost the EU around €100 billion extra this year, with no additional energy received, the report says. The rise in the import bill was set out here on 17 October.

Over the first six months of the shock, EU fossil fuel spending was 31% lower than in the comparable period of the 2022 crisis, the report finds, partly because demand for imported fossil fuels fell 10%.

What to watch: 2027: the first auctions under ETS2, the carbon market for buildings, road transport and additional sectors.

Figures are from the European Commission’s press release on the 2026 EU Climate Action Progress Report and Carbon Market Report, dated 9 November 2026, with the report’s published summary and chapters; percentages and comparisons not attributed to a source are The Edge’s calculations.

Sources: European Commission, The Edge.

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