What the EU Emission Trading Scheme means for your vehicle registration

The EU Emission Trading Scheme (ETS) is a cap-and-trade system that sets limits on carbon dioxide emissions from vehicles and other sources across European Union member states. It does not directly block you from registering a vehicle, but it creates financial pressure on manufacturers to produce lower-emission cars, which shapes what models are available and their prices when you buy or renew registration.

If you are registering a vehicle in an EU country, the ETS affects you indirectly: manufacturers face penalties if their fleet average emissions exceed the annual target, so they either build more efficient vehicles, charge more for high-emission models, or both. You will see this in the options available to you and the cost difference between a petrol car and an electric or hybrid alternative.

The scheme does not require individual vehicle owners to pay into it or take action during registration. Instead, it operates at the manufacturer level. However, some EU countries layer their own registration taxes on top of ETS pressure, and those taxes do depend on your vehicle's emissions rating — which is why understanding your car's CO2 output matters when you register or renew.

Key Takeaways

  • The ETS sets annual emission limits for car manufacturers across the EU, pushing them to produce lower-emission vehicles or face financial penalties.
  • You do not pay into the ETS directly, but your registration cost may be affected by national taxes that are based on your vehicle's CO2 emissions.
  • The scheme has tightened targets every few years, making it more expensive for manufacturers to sell high-emission vehicles, which eventually raises prices for buyers.
  • Your vehicle's official CO2 rating (measured in grams per kilometre) determines how it is taxed in most EU countries during registration and renewal.
  • Electric and hybrid vehicles face lower or zero registration taxes in many EU countries because they produce zero or near-zero tailpipe emissions under the ETS framework.

How the ETS sets emission targets for manufacturers

The EU sets a fleet-average CO2 target that all car manufacturers must meet each year. That target has fallen repeatedly: it was 130 grams of CO2 per kilometre in 2015, dropped to 95 grams in 2021, and continues to tighten. Manufacturers that exceed the target pay a penalty of 95 euros per gram per vehicle sold in the EU — a cost that adds up quickly across thousands of cars.

To avoid these penalties, manufacturers invest in electric vehicles, hybrid technology, and engine efficiency. This is why you see more EV and plug-in hybrid options in EU showrooms than in countries without the ETS. Manufacturers also sometimes withdraw high-emission models from the EU market entirely and sell them elsewhere, which narrows your choices if you want a large petrol engine.

The penalty structure means manufacturers pass some costs to buyers. A manufacturer selling mostly high-emission vehicles will either raise prices on those models or invest heavily in low-emission alternatives. Either way, the ETS makes efficient vehicles relatively cheaper and high-emission vehicles relatively more expensive than they would be without the scheme.

How your vehicle's CO2 rating affects registration costs

Every new car sold in the EU has an official CO2 rating, measured in grams per kilometre (g/km). This figure comes from standardised testing and appears on the vehicle's label and registration documents. Most EU countries use this rating to calculate registration tax, road tax, or both.

The tax structure varies by country. In some places, registration tax is a flat percentage of the vehicle price with a CO2-based adjustment. In others, it is a sliding scale: a car rated at 100 g/km might pay one rate, while a car at 200 g/km pays significantly more. A few countries have abolished registration tax entirely but explore higher annual road tax to high-emission vehicles instead.

When you renew your registration each year, the same CO2 rating usually applies to your road tax calculation. This means a 10-year-old car keeps the same emissions rating it had when new — the rating does not change based on how the car actually performs. If you are comparing the true cost of ownership between a cheap high-emission car and a more expensive efficient car, factor in the registration and road tax difference over the years you plan to keep it.

Why electric and hybrid vehicles get preferential treatment

Under the ETS, a battery electric vehicle (BEV) has a CO2 rating of zero grams per kilometre because it produces no tailpipe emissions. A plug-in hybrid (PHEV) gets a lower rating based on its electric range and assumed driving patterns. This zero or near-zero rating makes them attractive under national tax systems.

Many EU countries offer registration tax reductions or exemptions for electric vehicles. Some countries waive registration tax entirely for BEVs, while others explore a reduced rate. A few countries have started to phase out these incentives as EV adoption rises, so the tax advantage varies by country and changes year to year. When you are comparing the cost of an electric vehicle to a petrol alternative, check your country's current registration tax rules — the difference can be thousands of euros.

The preferential treatment is intentional: it accelerates the shift away from petrol and diesel vehicles, which helps manufacturers meet the ETS targets and reduces overall fleet emissions. From a buyer's perspective, it means the true cost gap between an EV and a comparable petrol car is often smaller than the sticker price difference suggests.

How the ETS targets have tightened over time

The scheme began in 2009 with a target of 130 g/km. In 2015, the target was formally set at 95 g/km for 2021 onwards. In 2023, the EU agreed to further tighten the target to 93.6 g/km in 2025, 49.5 g/km in 2030, and 55.5 g/km in 2035 (with a review planned for 2026). These are not typos — the 2035 target is effectively a ban on new petrol and diesel cars, because meeting that target with combustion engines alone is not technically feasible.

Each tightening forces manufacturers to accelerate their shift to electric vehicles. This affects what you see in showrooms: manufacturers prioritise EV development and production, and petrol models become fewer and more expensive. If you are buying a car now and plan to keep it for 10 years, the ETS trajectory means resale value for high-emission vehicles will likely decline, while efficient and electric vehicles will hold value better.

The tightening also explains why registration incentives for EVs are being reduced in some countries — as EVs become the default option rather than a niche product, the need for tax incentives diminishes. By 2035, the ETS framework will have effectively eliminated new petrol and diesel vehicle sales in the EU, so registration tax structures will likely shift to focus on other factors like vehicle weight or energy consumption.

What happens if you register a used car from outside the EU

If you import a used vehicle from outside the EU — for example, from the United Kingdom or the United States — it still needs to meet EU emissions standards to be registered. The vehicle must have a valid emissions certificate or pass a roadworthiness test that includes emissions checks. The CO2 rating used for registration tax purposes is the official rating from the vehicle's original certification, if available, or an estimated rating based on the vehicle's specifications.

Imported vehicles often face higher registration costs because they may not have the same emissions data as EU-certified cars, or because they were built to different standards. Some countries require a full re-test or certification before registration is allowed. If you are considering importing a vehicle, check with your national registration authority first — the cost and complexity of bringing a non-EU vehicle into compliance can outweigh any savings from buying it abroad.

How to find your vehicle's CO2 rating and registration tax

For a new car, the CO2 rating is on the EU energy label attached to the vehicle in the showroom. It is also in the vehicle's technical documentation and on the manufacturer's website. The label shows the rating in g/km and often includes a letter grade (A to G) for quick comparison.

For a used car, the CO2 rating is in the registration certificate (the document issued when the car was first registered). If you are buying a used car privately and do not have the original documents, you can contact the seller's national registration authority with the vehicle's registration number, and they will provide the official rating.

To estimate your registration tax, use your country's tax calculator on the national registration authority website. Most EU countries publish online tools where you enter the vehicle's CO2 rating and price, and the calculator shows the estimated tax. The actual amount may vary slightly depending on the exact date of registration and any local surcharges, so treat the calculator result as an estimate rather than a final figure.

Frequently Asked Questions

Does the ETS mean I cannot register a high-emission car?

No. The ETS limits explore to manufacturers' fleet averages, not to individual vehicles. You can still register a petrol SUV or any other high-emission car. However, you will pay higher registration tax in most EU countries because of the vehicle's CO2 rating, and the range of high-emission models available in showrooms has shrunk because manufacturers are shifting production toward lower-emission vehicles.

Will my registration tax change if I renew my car's registration next year?

The CO2 rating on your vehicle's registration certificate does not change year to year. However, the tax rate applied to that rating can change if your country updates its tax law. Some countries have frozen or reduced registration tax rates, while others have increased them. Check your national registration authority's website for any announced changes to tax rates for the coming year.

If I buy an electric car, do I pay zero registration tax everywhere in the EU?

No. Most EU countries offer reduced or zero registration tax for electric vehicles, but the rules vary. Some countries have phased out the exemption or capped it at a certain vehicle price. A few countries explore a small registration fee even for EVs. Check your country's current rules before buying — the tax advantage can be worth thousands of euros, but it is not may provide everywhere.

What is the difference between the ETS CO2 rating and real-world emissions?

The official CO2 rating comes from standardised laboratory testing, which often produces lower emissions figures than real-world driving. The gap between the test rating and actual emissions varies by vehicle type and driving conditions. For registration tax purposes, only the official rating matters — that is what your tax bill is based on, regardless of how the car actually performs on the road.

Will the ETS eventually make petrol cars illegal to register?

Not directly through the ETS itself, but the EU's 2035 target of 55.5 g/km is effectively a ban on new petrol and diesel vehicles, because meeting that target with combustion engines is not feasible. From 2035 onwards, only electric vehicles and possibly some advanced synthetic fuels will be able to meet the target. You will still be able to register used petrol cars, but new petrol car sales will have ended by then.