The European Union Emissions Trading System (EU ETS) requires greater flexibility and modernization. European Commission President Ursula von der Leyen endorsed this view and announced four measures that take into account the interests of industry and its desire to maintain competitiveness and overall viability amid the energy crisis.
This is stated in a statement by the European Commission President, which she delivered following the European Council meeting.
"The measures must be temporary and targeted. And this is precisely the logic behind the plan I presented today: immediate relief where possible, and structural changes where necessary. We will act on all four components that determine electricity prices," emphasized Ursula von der Leyen.
Responding to business concerns, EU leaders agreed to review the benchmarks for free carbon emission allowances. This refers to the emissions cap below which a company does not yet have to pay on the carbon market.
The second step in the EU ETS plan is to increase the capacity of the Market Stability Reserve. This measure is expected to stabilize price spikes in carbon auctions and provide greater predictability.
These measures are short-term and will be “implemented in the coming days.”
Review of the EU ETS – to be undertaken
Ursula von der Leyen stated that the European Commission is already working to review the emissions trading system. Among the critical aspects to be considered are a more realistic methodology for reducing the level of free allowances after 2034 and equal conditions for the maritime sector.
Regarding this medium-term measure, agreements have already been reached with EU member states and other stakeholders.
Financial support for decarbonization
The President of the European Commission proposed a new investment incentive. With a €30 billion budget, it will be aimed at supporting decarbonization projects. This initiative is to be funded by 400 million ETS allowances.
“Key principles are speed and solidarity. Speed means ‘first come, first served’-as soon as the project is ready, we must also be ready. Solidarity means lower-income countries will have guaranteed access to this vital financial support,” said the President of the European Commission.
Advantages of the EU ETS
According to the European Commissioner, the European model of the emissions trading system really works. Among the positive effects of the ‘emissions tax’, she lists the following:
- Reduction of gas consumption, which has decreased both the EU’s vulnerability and dependence on imports;
- Incentives for investment in domestic energy – both renewables and nuclear. This generation operates within countries and strengthens them.
“Carbon” context
The EU ETS system applies an additional “carbon tax” to polluting enterprises, in particular the energy sector, heavy metallurgy, cement, and chemical industries.
As a result, energy costs in the EU are higher than those of competitors, which has already led to the closure of several enterprises.
Some countries, including Italy, are calling for the system to be suspended until its rules are revised. As it turns out, Italy has actually allocated only 9% of its EU ETS revenues to climate measures.
However, a number of states consider this system a progressive advantage for European industry and evidence of the European Union’s climate awareness.
