Road transportation emissions in Europe are moving from a reporting issue to a direct freight cost issue, especially for road freight transportation and carbon emissions accountability.
With EU ETS 2, fuel suppliers will be required to account for the carbon emissions generated when fuels are consumed. The obligation sits upstream, but the cost will not stay there. It is expected to move through fuel prices, carrier rates, fuel surcharges, and other pricing mechanisms into the freight budgets of shippers operating over the road (OTR) transportation across Europe.
For shippers, the risk is not only that road freight becomes more expensive. It is realizing too late that part of the exposure in road transport could have been reduced through:
- operational changes
- procurement optimization
- EV deployment
- intermodal shifts (assessing rail freight vs road freight emissions)
- shipment consolidation
- strategic carrier collaboration
By the time ETS 2 related costs are fully embedded into road freight transport pricing, many shippers will have fewer options. At that point, the discussion may no longer be about how to reduce exposure, but how much of it needs to be absorbed.
Key takeaways:
- EU ETS 2 will indirectly increase road freight costs across Europe through fuel pricing and carrier surcharges, affecting road freight transport budgets.
- The compliance obligation sits with fuel suppliers, but the financial exposure will likely reach shippers via carbon emissions cost pass-through.
- Shipment-level execution data is becoming increasingly critical for identifying opportunities to reduce ETS 2 exposure, lowering both freight costs and road freight emissions.
- Operational changes such as rail modal shifts, consolidation, EV deployment, and carrier collaboration may materially reduce future cost exposure and lower tank-to-wheel emissions.
- Companies that wait until ETS 2 costs are fully embedded into freight pricing may lose flexibility to reduce exposure economicallyin road freight transportation.
How EU ETS 2 Will Increase Road Freight Costs
The EU Emissions Trading System (EU ETS) is a cap-and-trade mechanism that requires entities within scope to surrender one carbon allowance for every tonne of CO2 they emit. The original EU ETS already covers maritime shipping, with carriers now required to surrender allowances covering 100% of their verified voyage emissions. EU ETS 2 applies the same cap-and-trade principle to road transport and buildings, but with a structural difference: here the compliance obligation falls on fuel suppliers, not on the companies burning the fuel. The cap is designed to reduce covered emissions by 42% by 2030 compared to 2005 levels, with the total volume of available allowances tightening progressively to get there. Fuel suppliers will pass the carbon cost downstream through higher fuel prices, and carriers will transmit it further through surcharges or rate adjustments. Entities that fail to surrender sufficient allowances face a penalty of €100 per tonne of uncovered emissions, adjusted for inflation. That backstop ensures the cost does not disappear at any point in the chain.
The obligation is upstream. The exposure lands on the freight budget.
EU ETS 2 entered its monitoring and reporting phase in 2025, with surrender obligations following in 2027. The scope of what gets measured is also specific. EU ETS 2 calculates allowances strictly on Tank-to-Wheel (TtW) emissions, the direct CO₂ released from burning fuel in the vehicle. Upstream fuel production, the Well-to-Tank (WtT) portion, is not covered.
EU ETS 2 is expected to become fully operational in 2028. During the early phase, if allowance prices rise above a defined threshold, additional allowances may be released to limit excessive price increases.
In today’s terms, that threshold is approximately €58 per tonne of CO₂.
|
Assumptions |
|
|
|
|
|
Baseline (Today) |
Lower Case |
Upper Case |
|
Allowance Cost (€) |
58 |
43.5 |
72.5 |
Assuming only direct exposure to allowance costs, a shipper with 1,000 tonnes of Tank-to-Wake (TtW) road emissions would face an annual exposure of €58,000.
That is only the baseline. Actual exposure will depend on allowance prices, fuel pricing, carrier pass-through mechanisms, and the way carbon-related costs are reflected in freight rates or surcharges.
A real VesselBot client example shows how quickly this can become material.
In 2025, the client recorded 2,448 road shipments on a trade lane originating in Germany and destined across Europe. Across those shipments, Tank-to-Wake emissions reached 3,784 tonnes.
At an allowance cost of €58 per tonne, the direct carbon exposure would already reach €219,472.
|
EU ETS 2 Exposure |
Percentage of cost (€) the shipper will assume |
||||
|
80% Cost |
100% Cost |
120% Cost |
150% Cost |
||
|
Scenario for Allowance Cost (€) |
Lower Case (75%) |
131,683 |
164,604 |
213,985 |
246,906 |
|
Baseline |
175,578 |
219,472 |
285,314 |
329,208 |
|
|
Higher Case (125%) |
219,472 |
274,340 |
356,642 |
411,510 |
|
If allowance prices were 25% higher than expected and the overall pass-through reached 150% of the expected allowance cost, exposure for the same shipment activity would rise to €411,510.
This is where better data becomes a commercial requirement.
The question is not only whether the shipper can calculate emissions for reporting. The question is whether the shipper can identify where the exposure sits, which flows are driving it, and which operational levers can reduce it before the cost becomes unavoidable.
Why Shipment-Level Data Matters for EU ETS 2
Most shippers already have transport data. They may have ERP records, TMS data, freight invoices, carrier reports, or annual Scope 3 emissions calculations.
But for ETS 2, the challenge is different.
Annual averages and generic emission factors may support reporting, but they are often not enough to support cost reduction decisions. They can show that emissions exist, but not always where the exposure sits, why it is being created, or what can realistically be changed.
That distinction matters because ETS 2 is not only a reporting issue. It is a freight cost and network design issue.
To reduce exposure, shippers need to understand their road transport activity at the level where operational decisions are made: shipment, lane, carrier, route, mode, weight, distance, transport leg, and emissions profile.
This is where shipment execution data becomes critical.
VesselBot’s approach starts from how goods actually move. It combines shipment execution data with fuel-consumption-specific emissions logic to identify where ETS 2 exposure sits across the network and which actions can reduce it.
Traditional reporting data answers: “How much did we emit?”
Execution-grade data helps identify:
- Which lanes generate the highest ETS 2 exposure
- Which carriers are less efficient
- Which routes may be suitable for modal shifts
- Where EV deployment could be feasible
- Where consolidation may reduce future costs
That is what allows shippers to identify which lanes create the highest exposure, which flows may be suitable for rail, where EV or alternative fuel deployment could make sense, and where strategic carrier collaboration could reduce future cost before it becomes embedded into freight pricing.
How Shippers Can Reduce ETS 2 Exposure and Freight Costs
One VesselBot client used route-level execution data and VesselBot’s Logistics Intelligence Platform that provides feasible optimization suggestions to assess whether a specific road flow could move to rail. This analysis compared the emissions and cost implications of moving freight by rail versus road.
Across 2025 and 2026, the client moved 7,426.2 tonnes on that route, generating 653.1 tonnes of CO₂e.
By shifting from road to rail, average transit time increased from 2.4 to 3.5 days. But emissions per tonne of cargo fell from 94 kg to 16 kg, cutting road freight emissions, while total transport cost remained broadly comparable.
The ETS 2 implication was also material. In the road scenario, 494.9 tonnes were Tank-to-Wake emissions, equivalent to €28,702 of potential carbon cost exposure at €58 per tonne.
This is the type of decision shippers will need to make more often: not only which option reduces emissions, but which option reduces future cost exposure without damaging service or cost performance.
Preparing Road Freight Networks for EU ETS 2
For shippers operating OTR transportation in Europe, ETS 2 should not be treated as a future compliance topic. It should be treated as a future freight cost exposure.
Acting early is increasingly becoming a pivotal step in safeguarding supply chains; however, action alone does not guarantee results. For companies to be able to meaningfully reduce their exposure, they need data with very specific characteristics:
- Real Time: data that describes today’s operations, not what happened in the previous quarter or year.
- Shipment Execution: data that fully describes operations (fuel consumption, utilization rates, actual routing). This can be achieved through telematics and IoT devices.
VesselBot helps shippers quantify ETS 2 exposure using shipment execution data, model the financial impact of different scenarios, and identify where operational action can reduce both emissions and cost risk.
Potential exposure-reduction strategies include:
- Shipment consolidation
- Intermodal shifts
- EV deployment
- Alternative fuel adoption
- Shipper and Carrier collaboration
- Network redesign
If you operate road transportation in Europe, now is the time to understand where your exposure sits, which costs can still be avoided, and which decisions need to be made before ETS 2 costs become part of your freight baseline.
Q&A
What is EU ETS 2 and how will it affect road freight costs?
EU ETS 2 extends the EU’s cap-and-trade system to road transport and buildings. While the formal compliance obligation sits with fuel suppliers (not shippers or carriers), the carbon cost will be passed downstream via fuel prices, surcharges, and rate adjustments into shippers’ freight budgets. Unlike general Scope 3 accounting, ETS 2 charges only Tank-to-Wheel (TtW) emissions (direct fuel combustion), not Well-to-Tank (WtT) or upstream fuel production. The cap aims to cut covered emissions 42% by 2030 versus 2005, and non-compliance carries a €100/tonne penalty (inflation-adjusted), ensuring the cost remains in the system and ultimately reaches transport buyers.
When will EU ETS 2 start impacting road freight budgets, and are there safeguards against price spikes?
ETS 2 entered monitoring and reporting in 2025, will surrender obligations beginning in 2027 and full operation is expected in 2028. Although the obligation is upstream, cost pass-through can begin as markets price in carbon. During the early phase, if allowance prices rise above a defined threshold (about €58 per tonne CO₂ in today’s terms), additional allowances may be released to limit excessive price increases, providing a temporary safeguard against sharp spikes.
Why is shipment-level execution data essential for managing ETS 2 exposure?
Annual averages and generic factors reveal “how much” but not “where” and “why.” Execution-grade data connects emissions and cost to decision points - shipment, lane, carrier, route, mode, weight, distance, transport leg, and emissions profile - so shippers can:
- Pinpoint lanes creating the highest ETS 2 exposure
- Identify carriers and routes driving emissions
- Find consolidation opportunities
- Flag flows suitable for rail or EV deployment
- Prioritize operational changes before costs embed into freight rates
What practical actions can shippers take now to cut ETS 2 exposure without sacrificing service?
Shippers may be able to reduce future ETS 2-related freight cost exposure through several operational and procurement strategies, including:
- shifting suitable flows from road to rail
- consolidating shipments
- redesigning transport networks
- deploying electric vehicles where feasible
- using alternative fuels
- collaborating strategically with carriers
- optimizing routes and transport legs
The earlier these actions are evaluated, the more flexibility companies may have before ETS 2 costs become fully embedded into freight pricing.
Why is ETS 2 considered a freight cost issue rather than only a sustainability issue?
ETS 2 transforms carbon emissions from a reporting metric into a direct commercial cost driver.
As carbon pricing becomes embedded into:
- fuel costs
- carrier pricing
- freight procurement
- transport network decisions
companies will increasingly need to manage emissions not only for sustainability reporting, but also for cost control and supply chain competitiveness.
This makes ETS 2 both an environmental and financial planning issue for shippers operating road freight in Europe.
Sources
- ETS2: Buildings, road transport and additional sectors
- EU Emissions Trading System
- International Carbon Action Partnership/ EU ETS2
About the author Manos Charitos is Data Analyst at VesselBot, where he works with AIS-tracked voyage data, digital twin models, and shipment-level execution records to measure and interpret maritime emissions across global supply chains. The analysis in this article is his own work, drawn from 2025 voyage data across all major carriers. His background combines Mathematics and Shipping, giving him both the quantitative foundation to model emissions at the voyage level and the operational context to understand what those numbers mean for shippers making carrier and routing decisions.