EU ETS penalty: what happens if you surrender too few allowances?

Updated 13 November 2026

Under the EU Emissions Trading System (EU ETS), every tonne of CO₂ equivalent (CO₂e) emitted by a covered installation must be matched by an allowance surrendered on time. If an installation falls short, its operator is liable for an excess emissions penalty, often simply called the EU ETS penalty. This article explains what it costs, how the amount is set and what it triggers beyond the payment.

Surrendering allowances: the annual obligation behind the penalty

Each year, the operator of an installation covered by the EU ETS must surrender allowances equal to the installation's verified emissions for the previous year. One allowance covers one tonne of CO₂e. Allowances are surrendered in the Union Registry and then cancelled (Article 12(3) of Directive 2003/87/EC).

Surrender closes an annual sequence. Emissions are monitored and reported, then checked by an accredited verifier.

The date that matters is the annual compliance deadline: 30 September at the latest. Any tonne still uncovered at that point falls within the scope of the penalty.

How much is the EU ETS penalty for missing allowances?

The amount is set by the directive itself and applied in each Member State. It rests on two rules: a base amount per tonne and an annual adjustment.

€100 per tonne: the base amount

An operator that has not surrendered enough allowances by the deadline is liable for an excess emissions penalty. The base amount is €100 for each tonne of CO₂e emitted for which no allowance has been surrendered (Article 16(3)).

The rate does not depend on the size of the installation or on its sector. A glassworks and a dairy face the same amount per missing tonne. The penalty sanctions a breach: it does not replace the surrender, which remains due.

An amount indexed to European inflation

The €100 is only a starting point: the directive indexes it to the European index of consumer prices (Article 16(4)). According to the European Commission, the penalty therefore rises every year in line with inflation in the Union, so the amount due today is higher than €100 per tonne.

What a shortfall triggers beyond the payment

The penalty is only the most visible consequence of a shortfall. Two other effects follow directly from the directive.

The missing allowances are still due

Paying the penalty does not release the operator from the obligation to surrender. The missing allowances must be surrendered the following year, on top of those covering that year's own emissions (Article 16(3)). The burden is therefore twofold.

Take an installation that is 500 allowances short at the deadline. Because of indexation, the penalty exceeds €50,000. The operator must also obtain 500 additional allowances and surrender them the following year.

The operator's name is made public

Member States publish the names of operators that have not surrendered sufficient allowances (Article 16(2)). A shortfall therefore becomes public information, not only a cost.

Beyond these rules, each Member State sets its own penalties for breaches of the national provisions transposing the directive. These penalties must be effective, proportionate and dissuasive (Article 16(1)).

Handling EU ETS compliance on your own? The Homaio Comply team can answer your questions and help you keep track of your obligations. Talk to an expert

📖 Read also: Why are there free EUAs in the EU ETS?

In summary

For an installation covered by the EU ETS, a shortfall cannot be settled with a payment alone. The excess emissions penalty, adjusted every year, replaces nothing: the obligation remains and is added to the next year's. The operator's name is also made public. Anticipating the gap between verified emissions and available allowances before 30 September is the surest way to avoid this chain of consequences.

Homaio Comply supports companies covered by the EU ETS in buying their allowances and managing their compliance. For any question about your installation, you can talk to the team or explore Homaio Comply.

FAQ: missing allowances and the EU ETS penalty

Do free allowances protect an installation from the penalty?

Not necessarily. Free allocation is calculated from common benchmarks multiplied by the installation's historical activity level, not from its actual emissions of the year (Delegated Regulation (EU) 2019/331, Article 16). It is only adjusted when the activity level changes by more than 15% (Implementing Regulation (EU) 2019/1842, Article 5). If verified emissions exceed the allowances surrendered, the gap is subject to the penalty.

Is holding enough allowances in the registry account enough?

No. The penalty applies to each tonne for which no allowance has been surrendered (Article 16(3)). What counts is the surrender itself in the Union Registry before the deadline, not simply holding allowances in the account.

Has the penalty always been €100 per tonne?

No. The original version of the directive set €40 per tonne for 2005 to 2007. The amount rose to €100 from 2008, and has been indexed to the European index of consumer prices for allowances issued from 1 January 2013 (Article 16(4)).

Does the penalty depend on the allowance price?

No. The amount is set per tonne by the directive and follows European inflation, not the price of allowances. In every case, it comes on top of the obligation to surrender the missing allowances.

Does a small shortfall also trigger the penalty?

Yes. The penalty applies to each tonne of CO₂e for which no allowance has been surrendered, and Article 16(3) sets no tolerance threshold. A shortfall of a few allowances is penalised in the same way, tonne by tonne.

What happens if the emissions report is not verified in time?

An operator whose report on the previous year's emissions has not been verified as satisfactory by 31 March can no longer transfer allowances until a report has been verified as satisfactory (Article 15 of the directive). Other breaches fall under the penalty regime set by each Member State (Article 16(1)).