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As far as I could discover, although the EU runs a centralized Union Registry for ETS transactions, in which all member states must participate (well the UK was suspended at the beginning of this year), the primary auction mechanism for ETS allowances is outsourced mostly to a German company called EEX (which is a member of the Deutche Borse Group), except for the UK which uses an US auction provider (the Intercontinental Exchange).

Since the ultimate recipient of ETS primary auction money always seems to be a member state, does this primary auction money pass through "EU coffers" at all?

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  • Close related, possible duplicate: politics.stackexchange.com/q/41594/1370
    – Martin Schröder
    May 22, 2019 at 21:06
  • @MartinSchröder: I asked both questions, I think they are distinct.
    – Fizz
    May 22, 2019 at 21:09
  • Don't know the details about this particular mechanism but generally speaking, it's EU money that goes through member states coffers rather than the other way around. Thus, VAT or customs duty is collected by member states. The EU Commission isn't setup to deal with a myriad individual claims or transactions, instead focusing on auditing and controlling how member states implement its programmes. Even structural funds (ERDF, ESF, cohesion funds, etc.) are transferred to member states or, in some cases, provinces who are in charge of the actual disbursement to specific projects or initiatives.
    – Relaxed
    Jan 15, 2021 at 11:38
  • AFAIK, only the higher education stuff (research framework programmes and ERASMUS+) and the CEF include sizable amounts of money centrally managed through direct grants.
    – Relaxed
    Jan 15, 2021 at 11:40

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By the sounds of it the EU ETS money does not pass through EU coffers. Member states implement the EU ETS nationally and revenues can flow directly into member state budgets as long as the "equivalent in financial value" of a determined share of the revenues is used as stipulated by the scheme:

Article 10(1) of Directive 2003/87/EC states that:

[...] Member States shall auction all allowances [...]

Article 10(3):

Member States shall determine the use of revenues generated from the auctioning of allowances. At least 50 % of the revenues generated from the auctioning of allowances […] or the equivalent in financial value of these revenues [...] should be used [...] to reduce greenhouse gas emissions […]

Further, the 2015 EU ETS Handbook (p.36) states:

It should be noted that not all auction revenues go to Member States. Up to 300 million allowances from the New Entrant Reserve (NER), the so-called NER300, are sold on by the European Investment Bank. The revenue of these allowances are to establish a demonstration programme comprising the best possible Carbon Capture and Storage and Renewable Energy Supply projects, involving all Member States (see NER300 fund for demonstration projects).

This report by Ecologic Institute discusses the details of member state reporting their use of EU ETS revenues and proposes improvements:

[Member states] can decide whether they allocate the revenues from auctioning of allowances directly to a fund or support programme, a process known as earmarking, or count the auctioning revenues as an additional income stream to the state budget.

There have been discussions to transfer national ETS auction receipts to the EU central budget, see e.g. here (2018).

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