For over 20 years, the European Union Emissions Trading Scheme (EU ETS) has been working to reduce pollution from specific industrial sectors. However, under pressure from businesses and governments, which cited threats to competitiveness and excessive costs, the European Commission published proposals on 17 July to revise the ETS. Climate experts saw this as concessions to business that threaten decarbonisation plans.
This is reported by Euronews.
Concessions due to a changed context
Since its inception, the EU ETS has generated over €270 billion in revenue for the EU. At the same time, emissions in the sectors covered by the scheme have fallen by 50 per cent. However, the European Commission has stated that the geopolitical and economic context has changed, leading to a review of this flagship climate policy instrument.
The EU was due to stop issuing free emission allowances by 2034. However, one of the Commission’s proposals is to postpone this date to 2038. 80 per cent of free allowances will be allocated to companies planning to invest in decarbonisation. The remaining 20 per cent will be granted once the investments have actually been made.
“The EU Emissions Trading System has proven that carbon pricing works. It has reduced emissions, strengthened Europe’s energy security, and mobilised investment throughout our economy. The proposal to review the ETS combines three key objectives: fighting climate change, competitiveness, and independence,” said European Commissioner for Climate Action Wopke Hoekstra.
Expert response
The European environmental community has strongly criticised the Commission's proposals. Experts claim that these measures support delaying emission reduction instead of decarbonisation.
“This looks like a gift to companies – to delay emission reductions, when in fact it puts them at a disadvantage compared to Chinese firms, which are accelerating. Once again, political pressure outweighs economic and market realities,” stressed Linda Kalcher, Executive Director of the pan-European climate think tank Strategic Perspectives.
In her view, investment in environmental innovation will be at risk, and achieving the goal of a 90% reduction in emissions by 2040 will become prohibitively expensive.
Experts are convinced that every additional tonne of CO2 permitted under the EU ETS makes Europe’s climate challenge more complicated and costly.
“Weakening the ETS now is a gift to polluters that have prioritised shareholder payouts over investing in cleaner production, at the expense of citizens, future generations, and those companies that have already invested in climate-friendly solutions,” noted Chiara Martinelli, Director of Climate Action Network (CAN) Europe.
Indecision Regarding Aviation
The European Commission has made a rather indecisive attempt to force airlines to pay for emissions. The rules will come into effect only by 2029 and will apply to flights of up to 5,000 km. In other words, 47% of European aviation will remain outside the carbon market.
“If all departing flights were included in the scope of the carbon market, the EU would receive approximately €4.2 billion in additional revenue. However, due to pressure from the industry, only a portion of flights will be covered, while the longest and most polluting flights will remain exempt,” emphasized Diana Vitri from the Transport & Environment Association (T&E).
EcoPolitic covered in detail the changes to the EU ETS proposed by the European Commission. Previously, we analyzed who is attempting to weaken the European Union’s main climate instrument and why.
