The EU Emissions Trading System (EU ETS) can cover large agri-food processing businesses — including dairy plants, sugar factories, breweries and meat processors — where the combined rated thermal input of fuel-burning installations exceeds 20 MW, Portal Spożywczy reports.

The system does not cover farming directly, yet its effects are increasingly felt across the whole agri-food sector. As Dr Jarosław Pietras, former Director-General of the Council of the European Union in 2008–2020, told Portal Spożywczy, the rising price of emissions stems from a shrinking pool of available allowances and pushes companies to invest in energy efficiency and low-carbon technologies.

Which agri-food firms are covered

Agriculture itself is not currently in the EU ETS, the expert noted, but the system can apply to large agri-food processors that operate energy or heat installations above defined capacity thresholds — namely where the total rated thermal input of a company’s combustion devices exceeds 20 MW. 

“These can include large sugar plants, food processing facilities, dairy plants, breweries, distilleries or meat processors using large combustion installations,” he said. 

Indirectly, however, all agri-food businesses feel the ETS through higher costs of electricity, heat and fertilisers, whose production is covered by the system.

How the allowance system works

The EU ETS sets an EU-wide cap on CO2 emissions and allocates allowances within it to covered entities, while creating a market to buy and sell them. 

“Companies must hold allowances exactly matching the size of their emissions; they can receive them partly free of charge or buy them at auctions and on the secondary market. If a company cuts emissions, it can sell unused allowances. If it emits more than it holds, it must buy the missing units. Year on year the total number of allowances is reduced, leading to a gradual cut in overall emissions,” Pietras explained.

Obligations for businesses

The Team Europe Direct expert recalled that the legal basis is Directive 2003/87/EC, repeatedly amended — most recently under the “Fit for 55” package by Directive (EU) 2023/959, with a further revision now under discussion. Current rules foresee gradually tightening caps, fewer available allowances and a phase-down of free allocation for selected sectors. For covered companies, this means monitoring production emissions, reporting them annually and holding allowances matching their annual CO2 output.

All member states, Poland included, are responsible for implementing and enforcing the rules. Reports are checked by independent accredited verifiers, after which the authorities confirm their accuracy and check whether firms have surrendered the right number of allowances. In Poland, the system is run mainly by the National Centre for Emissions Balancing and Management (KOBiZE) and the Environmental Protection Inspectorate, supervised by the Ministry of Climate and Environment. Non-compliance can bring financial penalties and an obligation to buy the missing allowances.

Fertilisers and the carbon border levy

Imports of fertilisers from outside the EU are also covered by the carbon border levy (CBAM — Carbon Border Adjustment Mechanism). Because fertiliser production releases large volumes of greenhouse gases — including indirectly, through electricity generated from fossil fuels — those charges may significantly raise the price of imported fertilisers.

Carbon removals as an extra income stream

Pietras also pointed to practices such as cover crops, reduced tillage intensity, maintaining permanent grassland, restoring peatlands and raising soil organic matter. Though outside the EU ETS, they may become an important part of the transformation of Polish agriculture. 

“This system, created by EU Regulation 2024/3012 (Carbon Removals and Carbon Farming), sets rules for certifying activities that remove CO2 from the atmosphere by increasing carbon storage in soil, biomass and products. It is voluntary, but it may create opportunities for additional income where soil absorption of atmospheric carbon dioxide is confirmed,” concluded Dr Jarosław Pietras, Team Europe Direct expert and former minister for European affairs.

Source: Portal Spożywczy