EU industrial emissions down 41% under emissions trading system, study finds

The European Union’s Emissions Trading System (ETS) led to a 41% reduction in industrial emissions between 2021 and 2023, a decrease of around 800 million tonnes of carbon dioxide per year, according to new research published today (16 July 2026) by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science.

As the cornerstone of the European Union’s climate policy, the ETS plays a central role in the region’s efforts to achieve net-zero greenhouse gas emissions by 2050. Launched in 2005, it covers the greenhouse gas emissions of major industrial sectors, including power generation, industrial production and aviation.

The authors, Anton Bogachev and Frank Venmans, found a clear trend of reduced industrial emissions of greenhouse gases linked to the EU ETS: “12% reduction between 2008 and 2012, 18% between 2013 and 2020, and 41% between 2021 and 2023.”

In the paper, the researchers examined the effect of the cap-and-trade system on greenhouse gas emissions between 2008 and 2023. To do this, the authors compared emissions of industrial sites covered by the EU ETS with similar-sized sites in the same sector and country not covered by the scheme, because their emissions fall below the scheme’s inclusion criteria.

The effectiveness of the ETS can also be appreciated by comparing the aggregate emission reductions of the ETS and the non-ETS. Between 2005 and 2024, the aggregate emissions of the ETS sectors decreased by 50%, with “yearly emissions now 1 billion tonnes CO2 lower than at the start of the ETS.” By contrast, the research confirms that “non-ETS sectors, which represented more than half of the EU emissions, have reduced their yearly emissions by merely 17%, that is, by only 0.3 billion tonnes.”

The authors also compared the emissions of the ETS sectors in the EU with the emissions of the same sectors in the US, Japan, New Zealand and Australia. They found that “emissions have declined faster than the emissions of the same sectors in other similar countries.”

They also found that there were “larger emission reductions in bigger installations compared to smaller installations”. As large installations are underreported in the sample for the research, the effect on all ETS installations might be even larger.

Frank Venmans, Associate Professorial Research Fellow at the Grantham Research Institute on Climate Change and the Environment, said:  

“Our research shows that the EU’s ETS is paying off massively and is arguably the most impactful climate policy in the world.

“The effectiveness can’t be overstated, with 800 million tonnes of CO2 per year reduced between 2021-2023 thanks to the system.

“The lasting impact of the ETS will have huge ramifications for decades to come.”

Anton Bogachev, Energy Data Officer at the International Energy Agency, said:

“The success of the EU’s cap-and-trade system shows that, if the policy continues, the EU is on target for net zero by 2050.”

“We were able to show that with tighter caps, the effect of the ETS in terms of emission reductions increases significantly over time.” 

Michael Azlen, Founder and CEO of Carbon Cap, said: 

“Carbon pricing and Emissions Trading Systems are spreading quickly across the globe. As this paper demonstrates, the EU ETS has been extremely effective.  

“Our hope at Carbon Cap is that this research contributes to the adoption and launch of an ETS by one or more countries around the world.”