EU’s Carbon-Trading Scheme ETS: Road-Transport & Construction Insights

Table of Contents
- Understanding ETS2
- What is the EU Emissions Trading System (ETS)?
- Goals and Mechanisms of ETS
- Who is Affected by ETS Phase 2?
- Suppliers of Building and Automotive Manufacturing Materials
- Construction Companies and Car Manufacturers
- Energy Service Companies (ESCOs)
- Property Developers
- Facility Managers
- Architects and Engineers
- Building Owners and Landlords
- Fuels Covered under ETS2
- Key Areas of Impact in Construction and Buildings
- Impact of ETS 2 on Various Sectors
- Advanced Insights into ETS2
- Strategies for Construction Companies in Compliance to ETS2
- 1. Achieving Compliance with ETS2
- 2. Reducing Carbon Emissions in Construction Projects
- 3. Leveraging Carbon Reporting Tools for Compliance
- The Future of ETS2 in Construction
- 1. Preparing for Upcoming Phases and Challenges
- 2. Collaboration to Meet Goals
- 3. Long-Term Benefits of ETS2 Compliance
- Conclusion
- Frequently Asked Questions (FAQs)
- 1. What is ETS2?
- 2. Who does ETS 2 affect?
- 3. What is the ETS 2 timeline?
- 4. How does ETS 2 impact fuel prices?
- 5. What protections exist for vulnerable groups?
What if the cost of ignoring your carbon footprint was more than just environmental damage — but a direct hit to your bottom line? As sustainability becomes a critical focus globally, the EU Emissions Trading System (ETS) plays an important role as a market-based solution for climate change.
With the introduction of ETS Phase 2 (ETS2), fuel suppliers for the construction and road transport sector face new responsibilities and opportunities to engage with the European Union’s carbon market. This blog post is our comprehensive way of helping you understand ETS2, its implications, and how to align with its requirements to stay compliant, competitive, and sustainable.

Understanding ETS2
What is the EU Emissions Trading System (ETS)?
The EU Emissions Trading System (ETS) is Europe’s cornerstone policy for reducing greenhouse gas (GHG) emissions. Based on the “polluter pays” principle, the ETS is a cap-and-trade system, where companies are allowed to emit a certain amount (cap). If they emit more, they must purchase allowances for their emissions. If they emit less, they can sell those credits (trade). This creates a financial incentive for companies to reduce overall carbon output.
It has been implemented in phases, and each phase includes new sectors and types of greenhouse gases. With ETS2, the scheme expands to include buildings and road transport sectors, key areas of concern for climate change.
Learn more about Double Materiality and its role in carbon accounting.

Goals and Mechanisms of ETS
- Accelerate Decarbonisation: ETS
2aims to speed up the EU's transition to a low-carbon economy by introducing carbon pricing to additional sectors. - Expand Coverage: Includes buildings and road transport, significantly widening the scope of emissions covered under the EU ETS.
- Cap-and-Trade System: Establishes a cap on total emissions, with allowances that can be traded to incentivize cost-effective reductions.
- Financial Incentives: Encourages companies to innovate and adopt sustainable practices by making emissions reductions financially rewarding.
- Market-Based Approach: Creates a functioning carbon market where companies can buy and sell allowances to optimize compliance costs.
- Alignment with Climate Goals: Supports the EU’s broader climate objectives, including achieving net-zero emissions by 2050 and compliance with the Paris Agreement.

Who is Affected by ETS Phase 2?
While the original ETS 1 covers large industrial installations, power generation, and aviation, ETS 2 will address fuel suppliers of buildings and road transport sectors, who will be required to monitor and report their emissions. Therefore, it can indirectly impact its end users, businesses in the construction and road transport sectors, households, and authorities across Europe, including Ireland. As a response, a Climate Social Fund is being created to support micro-enterprises and vulnerable households. Here's an overview of those affected:
Suppliers of Building and Automotive Manufacturing Materials
- Suppliers of carbon-intensive materials like concrete, steel, and glass will face higher costs under ETS 2 due to the emissions associated with their production.
- This will likely increase construction costs and push the industry to adopt low-carbon alternatives, such as green concrete or recycled materials.
Construction Companies and Car Manufacturers
- Companies relying on fossil fuel-powered machinery (e.g., diesel generators, heavy equipment) will face increased costs as fuel suppliers pass on the expense of purchasing emissions allowances under ETS 2.
- Firms may need to transition to low-emission machinery or adopt electric and hydrogen-based alternatives, which can require significant investment.
Explore examples of Scope 3 emissions in manufacturing and their impact on carbon reporting.

Energy Service Companies (ESCOs)
- Companies providing energy efficiency retrofitting services are likely to see increased demand, as building owners and landlords aim to comply with ETS 2 requirements.
- There will be opportunities for offering energy audits, system upgrades, and the installation of renewable energy technologies.
Property Developers
- Developers need to integrate low-carbon technologies and meet energy efficiency standards in new construction projects.
- The demand for sustainable building materials and energy-saving designs is increasing, which may lead to higher initial costs but align with EU green building regulations.
Facility Managers
- If buildings are reliant on fossil fuels, managers will face increased operational costs for heating, cooling, and powering facilities.
- Energy audits and retrofitting existing systems with low-carbon alternatives (e.g., solar panels, and heat pumps) are likely to become mandatory to reduce long-term costs.
Architects and Engineers
- Design professionals must incorporate sustainable designs that comply with stricter building energy regulations.
- Increased focus on passive building design (using materials and layouts that minimize energy use) and renewable energy integration.
Building Owners and Landlords
- Residential and Commercial Property Owners: Individuals or organisations owning properties must bear the cost of increased fossil fuel heating expenses. Older, energy-inefficient buildings will see higher operational costs.
- Landlords: Rising heating and energy prices might be passed on to tenants, but landlords will face pressure to upgrade properties with energy-efficient systems like heat pumps and better insulation.
Fuels Covered under ETS2
The EU ETS Directive has identified the fuels covered under ETS2 as follows:
- (un)leaded petrol,
- gas oil,
- kerosene,
- LPG,
- natural gas,
- heavy fuel oil,
- coal and coke;
- any other product intended for use, offered for sale or used as motor fuel or heating fuel as specified in Article 2(3) of the Energy Taxation Directive (ETD). This includes any fuel additives used as motor fuel, certain bio-based fuels, and any other hydrocarbons for heating purposes, except for peat.

Key Areas of Impact in Construction and Buildings
- Potential Increased Costs for Fossil Fuel Heating: Heating systems relying on oil or natural gas will incur higher operating costs due to emissions allowances, incentivizing the shift to alternatives like electric heat pumps.
- Retrofitting: Older buildings with poor energy performance will require upgrades such as better insulation, energy-efficient windows, and renewable energy systems.
- Sustainable Materials: A push for adopting low-carbon materials (e.g., timber, recycled steel) to reduce embodied carbon emissions.
- Energy Efficiency Standards: New construction projects must adhere to stricter regulations, such as achieving near zero-energy buildings (NZEB) status, and increasing upfront costs for developers.
- Carbon Pricing: The indirect impact of increased costs from emissions allowances for building energy use or machinery emissions will be reflected in overall project budgets.
Impact of ETS 2 on Various Sectors
- The construction and building sector will need to shift toward:
- Low-carbon technologies for heating and cooling.
- Use of renewable energy sources to power operations.
- Adoption of circular economy principles, including recycling and reusing materials.
- Investing in energy efficiency measures to meet EU and national emissions targets.

Advanced Insights into ETS2
- Financial and Operational Implications
For construction companies, ETS2 introduces both risks and opportunities. Increased costs from purchasing allowances can strain budgets, particularly for emissions-intensive projects. However, companies that proactively reduce emissions can avoid these costs, benefiting from energy savings and enhanced reputations. Sustainable practices may also attract eco-conscious clients and investors.
- Opportunities for Innovation and Growth
Beyond compliance, ETS2 incentivizes innovation. Companies investing in low-carbon technologies, sustainable building materials, and energy-efficient processes gain a competitive edge. The push for sustainability can also open new market opportunities, such as eco-certified construction projects.
Strategies for Construction Companies in Compliance to ETS2
1. Achieving Compliance with ETS2
Compliance starts with understanding your emissions sources. Companies should:
- Conduct detailed carbon audits to identify major emission points.
- Develop strategies to reduce emissions, such as adopting energy-efficient equipment and using low-carbon materials.
- Invest in training to ensure teams understand ETS2 regulations and their role in meeting them.
2. Reducing Carbon Emissions in Construction Projects
The construction sector can take tangible steps to lower its carbon footprint:
- Use renewable energy sources for on-site operations.
- Opt for sustainable materials like recycled steel or low-carbon concrete.
- Optimise logistics to reduce transportation emissions.
- Implement energy-efficient designs and construction techniques.
3. Leveraging Carbon Reporting Tools for Compliance
Accurate reporting is crucial under ETS2. This is where tools like Mavarick’s carbon accounting software come into play. With Mavarick, construction companies can:
- Streamline emissions data collection.
- Ensure compliance with EU standards.
- Identify opportunities for further reductions, and enhancing sustainability goals.
Learn how data quality in carbon accounting improves compliance. By integrating such tools, companies can simplify their compliance process and focus on building a greener future.

The Future of ETS2 in Construction
1. Preparing for Upcoming Phases and Challenges
ETS2 is just the beginning. As the EU tightens its climate goals, construction companies must stay ahead of evolving regulations. Proactive measures taken now will position businesses as leaders in sustainable construction.
2. Collaboration to Meet Goals
Partnerships across the construction value chain can drive innovation and efficiency. Working closely with suppliers, subcontractors, and clients ensures that sustainability goals are met collectively, benefiting all stakeholders.
3. Long-Term Benefits of ETS2 Compliance
Compliance with ETS2 not only helps companies avoid penalties but also positions them as industry leaders in sustainability. This can attract new business opportunities, improve stakeholder confidence, and foster a culture of innovation.
Conclusion
ETS2 presents a challenge and an opportunity for the construction sector. By embracing the carbon market, companies can drive sustainability while complying with EU regulations. As the industry evolves, those who act early will reap the rewards of lower costs, enhanced reputations, and stronger market positions.
Ready to align your construction business with ETS2? Contact Mavarick today to simplify your carbon reporting and build a sustainable future.
Frequently Asked Questions (FAQs)
1. What is ETS2?
ETS2 is the EU’s carbon pricing system for buildings and road transport, requiring fuel suppliers to buy emissions allowances.
2. Who does ETS 2 affect?
Fuel suppliers, building owners, transport operators, and consumers due to higher heating and fuel costs.
3. What is the ETS 2 timeline?
ETS 2 begins in 2027, with a possible late start in 2028
4. How does ETS 2 impact fuel prices?
Heating and transport fuel costs will rise as suppliers pass on the cost of emissions allowances.
5. What protections exist for vulnerable groups?
The EU’s Social Climate Fund offers subsidies and financial aid to offset increased energy costs.
Carbon Accounting System
Carbon Emissions Reporting for the Supply Chain
- Visible Supply Chain
- Quality Data You can Trust
- Auditable Reports