The European Energy Exchange (EEX) will launch primary auction and secondary spot contracts for the EU’s new emissions trading system covering buildings and road transport (ETS2) on 18 January 2027, coinciding with the start of allowance auctions under the scheme, according to Carbon Pulse. For fuel suppliers preparing new compliance obligations and traders building hedging strategies, the announcement fixes the date on which price formation in Europe’s second carbon market begins.
Two contracts timed to the first auctions
EEX will expand its environmental market offering with two new EU ETS2 contracts from 18 January 2027, in order to support the trading community in the preparation for the upcoming compliance and risk management requirements, according to EEX. The launch will concur with the start of the EU ETS2 auctions, the exchange states.
The EU ETS2 primary auctions contract, together with the new secondary spot contract, will enable access to the emerging EU ETS2 market in a timely manner, according to EEX. The pairing means participants will be able to acquire allowances at source and manage positions on the secondary market from the outset of the scheme.
“The introduction of these new EU ETS2 contracts is an important milestone for the development of the European carbon markets,” said Steffen Koehler, Chief Commercial Officer of EEX, according to EEX. “Over the past two decades we’ve developed the EU ETS1 system, and we are looking forward to applying our experience to create the infrastructure required for transparent auctions, secondary market trading and effective risk management also as part of the new system.”
What EU ETS2 covers, and why the allowances stand apart
EU ETS2 is a new emission trading system covering emissions from fuel combustion in buildings, road transport and additional sectors not covered by the existing EU ETS1, according to EEX. The system extends carbon pricing to parts of the economy that sit outside the power generation and industrial installations covered by the original scheme.
A structural feature matters for market design. EU ETS2 allowances are separate from and non-fungible with allowances under the existing EU ETS1, the exchange states. Prices in the two systems will therefore form independently, and allowances from one scheme cannot be used to meet obligations under the other. For compliance buyers, that separation means ETS2 procurement strategies must be built on the new contracts rather than on existing ETS1 positions.
One auction platform for 27 member states
Under the CAP4 mandate, EEX will conduct auctions on behalf of 27 EU Member States, three EEA EFTA states, and the Social Climate Fund, according to EEX. The mandate concentrates primary market supply through a single auctioning platform, extending the exchange’s established auction role into the new system.
The Leipzig-based exchange brings existing market infrastructure to the task. As part of EEX Group, it serves international power, natural gas, environmental and freight markets, and provides data, reporting and registry services, according to EEX. Koehler’s reference to two decades of EU ETS1 development points to that track record as the base on which the ETS2 infrastructure is being built.
What it means for obligated entities and traders
For companies that will face ETS2 compliance obligations, the primary auctions contract provides the channel to acquire allowances directly at auction, while the secondary spot contract supports day-to-day position management between auction dates. The simultaneous start of both products means the market will offer a functioning buy-and-manage infrastructure from the first day of auctioning.
For traders and risk managers, the launch establishes the venue where ETS2 price discovery will take place. Because the allowances are non-fungible with ETS1 units, the new contracts will develop their own liquidity and price dynamics rather than tracking the existing market.
What to watch
Three markers stand out between the announcement and the January 2027 start. The first is the auction calendar: the scheduling and volumes of the auctions EEX will conduct under the CAP4 mandate for the member states, the EEA EFTA states and the Social Climate Fund. The second is participation: how quickly obligated entities and intermediaries onboard to trade the two new contracts. The third is early price formation: the first weeks of auctions and spot trading will set the initial reference levels for a market covering fuel combustion in buildings and road transport across the EU.
