Emissions in the ETS sectors must be cut by 62% by 2030; Free allowances to industries will be phased out from 2026 and disappear by 2034; An ETS II for fuel emissions from the building and road transport sectors as of 2027
On Saturday night, MEPs and EU governments agreed to
reform the Emissions Trading System to further reduce industrial
emissions and invest more in climate friendly technologies.
The EU Emissions Trading System (ETS),
which enshrines the “polluter pays” principle, is at the core of
European climate policy and key to achieving the objective of EU
climate-neutrality. By putting a price on greenhouse gas (GHG)
emissions, the ETS has triggered significant reductions in EU emissions,
as industries have an incentive to reduce their emissions and invest in
climate friendly technologies.
Increased ambitions for 2030
Emissions in the ETS sectors must be cut
by 62% by 2030, compared to 2005, which is one percentage point more
than proposed by the Commission. In order to reach this reduction, there
will be a one-off reduction to the EU-wide quantity of allowances of 90
Mt Co2 equivalents in 2024 and 27 Mt in 2026 in combination with an
annual reduction of allowances by 4.3% from 2024-27 and 4.4% from
2028-30.
Phasing out free allowances to companies
The free allowances to industries in the ETS will be phased out as follows:
2026: 2.5%, 2027: 5%, 2028: 10%, 2029: 22.5%, 2030: 48.5%, 2031: 61%, 2032: 73.5%, 2033: 86%, 2034: 100%.
The Carbon Border Adjustment Mechanism (CBAM), on which MEPs reached an agreement
with EU governments earlier this week to prevent carbon leakage, will
be phased in at the same speed that the free allowances in the ETS will
be phased out. The CBAM will therefore start in 2026 and be fully phased
in by 2034.
By 2025, the Commission shall assess the
risk of carbon leakage for goods produced in the EU intended for export
to non-EU countries and, if needed, present a WTO-compliant legislative
proposal to address this risk. In addition, an estimated 47.5 million
allowances will be used to raise new and additional financing to address
any risk of export-related carbon leakage.
An ETS II for buildings and transport
A separate new ETS II for fuel for road
transport and buildings that will put a price on emissions from these
sectors will be established by 2027. This is one year later than
proposed by the Commission. As requested by Parliament, fuel for other
sectors such as manufacturing will also be covered. In addition, ETS II
could be postponed until 2028 to protect citizens, if energy prices are
exceptionally high. Furthermore, a new price stability mechanism will be
set-up to ensure that if the price of an allowance in ETS II rises
above 45 EUR, 20 million additional allowances will be released.
Financing the green transition
More money will be made available for innovative technologies and to modernise the energy system.
The Innovation Fund, will be increased from the current 450 to 575 million allowances.
The Modernisation Fund
will be increased by auctioning an additional 2.5% of allowances that
will support EU countries with GDP per capita below 75% of the EU
average.
All national revenues from auctioning ETS allowances shall be spent on climate related activities.
MEPs and Council also agreed to establish a Social Climate Fund for the most vulnerable. A more detailed press release on this is available here.
Parliament
© European Parliament
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article