ETS 2 implications for Bulgaria: Fuel suppliers enter a new compliance regime

1. EU background and national legislation 

The EU Emissions Trading System 2 (EU ETS 2), introduced under the EU’s Fit for 55 climate package¹, establishes a new carbon pricing architecture for sectors not previously regulated under EU ETS 1. The new system covers buildings, road transport, heating fuels and smaller industrial activities. Unlike EU ETS 1 – which targets direct emitters of “greenhouse” gases – EU ETS 2 shifts compliance obligations upstream to fuel suppliers, requiring them to monitor, report and ultimately surrender emission allowances.

EU ETS 2 is based entirely on auctioned allowances with no free allocation provided. A significant part of the revenues will finance the Social Climate Fund (SCF), supporting vulnerable households and micro-enterprises impacted by rising energy and transport costs. The regulatory timeline includes monitoring obligations starting in 2025, verified reporting in 2026 and surrendering allowances from 2028 for emissions generated in 2027.

Bulgaria has aligned its national legislation with Directive (EU) 2023/959 through amendments to the Climate Change Mitigation Act (CCMA)². The CCMA now defines the regulated entities, monitoring requirements and institutional responsibilities necessary for ETS 2 implementation. The list of fuels included in the Bulgarian transposition is broad and covers petrol, diesel, kerosene, LPG, natural gas, fuel oil, coal, coke and other hydrocarbon‑based heating and motor fuels.

National implementation – the Ministry of Environment and Water (MEW) guidance

National implementation remains in a preparatory phase. MEW has clarified that Bulgaria will regulate all upstream fuel suppliers, including:

• licensed excise warehouse keepers under the Excise Duty and Warehouses Act (EDWA)³ – including licensed natural gas traders;
• persons obliged to pay excise duties for natural gas, solid fuels and other heating/motor fuels; and
• entities designated by the competent authority when multiple persons could be jointly liable.

2. Affected entities

Under the CCMA, ETS 2 obligations apply to upstream fuel suppliers delivering fuels for:

• road transport (e.g. retail distributors and logistics operators);
• residential and commercial buildings (e.g. malls, trade centres, residential complexes); and
• small industrial sites not covered by EU ETS 1 (e.g. smaller manufacturing sites using fossil fuels for heating or processing).

3. Three-phased implementation timeline

Bulgaria follows the EU-level timeline, transposed into the CCMA, but is delayed in issuing the secondary legislation that will operationalise inter alia the registration, reporting and compliance procedures. The EU ETS implementation timeline in Bulgaria will be three-phased:

Phase 1: Preparatory phase – 2026

According to the CCMA, companies distributing fuels are required to obtain a greenhouse gas emissions permit.  The Executive Environment Agency (ЕxЕА) is responsible for administering the registration process. The procedure is currently on hold, as it is expected to start in early April 2026 (Art. 51г CCMA), with additional guidance to be issued by ExEA in February 2026).

As of 2026, all registered entities must develop and submit monitoring plans detailing calculation methodologies, fuel data management and emissions determination processes. Annual verified emissions reports must be submitted by 30 April of the respective year, with the first year subject to reporting being 2025. Verification must be performed by accredited verifiers under Regulation (EU) 2018/2067.

ExEA has clarified that pre‑2025/2026 emissions data may be submitted concurrently with permit registration to ensure compliance with early deadlines.

Phase 2: Allowance auctioning – 2027

Auctioning of EU ETS 2 allowances will commence in 2027 with no free allocation for Bulgarian or EU suppliers. Revenues will support the SCF and national climate measures aimed at mitigating the socio‑economic effects of carbon pricing.

Phase 3: Full compliance – 2028

From 2028, suppliers must purchase and surrender allowances corresponding to the carbon content of fuels placed on the market for regulated sectors. The CCMA incorporates the EU‑level cap‑and‑trade approach, including the annually declining emissions cap..

4. Expected market impacts in Bulgaria

The impact of EU ETS 2 on energy prices will vary greatly across sectors and countries. Costsare expected to rise for natural gas, heavy oil, LPG and solid fuels due to mandatory allowance purchasing by suppliers. Motor fuel prices could also potentially reflect carbon cost pass‑through from regulated Bulgarian suppliers.

To this end, ETS 2 provides a financial incentive to decrease reliance on fossil fuels by shifting to more sustainable and cheaper energy alternatives and improving energy efficiency. In long run, this could lead to structural changes in energy and fuel markets.  

5. Next steps

Given the timing of the Bulgarian transposition and the absence of secondary legislation, obligated entities are likely to encounter operational and compliance pressures once the new permitting regime is introduced in April 2026. The new legislative requirements will require businesses to implement process changes, data‑collection systems and reporting structures within compressed timelines, heightening the risk of disruption.

For many organisations, this represents a first exposure to regulated carbon pricing, necessitating the development of capabilities from the ground up. Companies that adopt a proactive approach – conducting preparatory assessments, building internal expertise and implementing compliance frameworks ahead of statutory deadlines – will minimise regulatory risks and position themselves strategically for the new carbon market environment.

Wolf Theiss is well‑positioned to guide your organisation through the evolving legislative landscape, ensuring a structured, compliant and future‑proof approach to meeting ETS 2 obligations.

1. Directive (EU) 2023/959 of the European Parliament and of the Council of 10 May 2023 amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union and Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading system (Directive (EU) 2023/959). ↩︎
2. Climate Change Mitigation Act, published in State Gazette No22/11.03.2014,as amended from time to time. ↩︎
3. Excise Duties and Warehouses Act, published in State Gazette No 91/2005, as amended from time to time. ↩︎