More and more leaders of European countries are criticizing the current EU ETS emissions trading system. The main cause for concern is the loss of industrial competitiveness and its decline amid rising climate costs and energy prices. A coalition of 13 countries is already preparing an appeal to the European Commission, and the Italian Minister of Industry has openly stated that the EU ETS has a "distorting effect."
A blow to industry
The ETS covers sectors such as heavy industry, power plants, shipping, and aviation. In the future review, landfills and waste incineration plants, as well as international aviation, are to be added.
According to critics of the EU ETS, this system puts unprecedented pressure on European industry, while foreign competitors enjoy more favorable conditions. For example, China and the US, whose imports are increasingly undermining the sustainability of EU domestic producers.
Italian Industry Minister Adolfo Urso has openly called on the EU to suspend the carbon market until it is revised, Euronews reports. The bloc is expected to present an updated proposal on emissions trading this summer, and until fairer conditions are established, industry must be freed from enormous obstacles.
“It is necessary – we all realize this – to thoroughly revise the ETS. To do this properly, the ETS mechanism must be suspended pending a reform that must necessarily be comprehensive. If we are facing the collapse of the European chemical industry and a crisis of European ideology, we cannot wait for negotiations within the European Union to find a solution,” – Urso told journalists in the corridors during a meeting of industry ministers in Brussels.
According to the Italian minister, the ETS is simply an additional tax burden on industry, which is trying to remain competitive. Although the EU created its emissions trading system as a tool to reduce emissions and encourage businesses to invest in environmental modernization and the search for clean alternatives.
Countries unite against ETS
In Brussels, 13 EU member states held a meeting within the framework of the "Friends of Industry" coalition. According to S&P Global, they agreed to submit a document to the European Commission with demands to ease the regulatory framework of the emissions trading system. The countries advocating for ETS deregulation include Germany, France, Italy, Austria, Croatia, the Czech Republic, Spain, Poland, Portugal, Romania, Slovakia, Slovenia, and Luxembourg.
The coalition's main caveat is that decarbonisation should not be achieved through deindustrialisation. According to these countries, the EU ETS should work to increase investment in innovation while maintaining the competitiveness of EU industry.
“Given the reduction of the emission cap for the entire EU, industrial entities are facing the risk of high price levels, increased market volatility, and limited liquidity. Therefore, the upcoming revision must ensure an effective price signal, market stability, predictability, and sufficient liquidity, as well as a pragmatic and investment-friendly approach that fosters investment in climate-neutral technologies and is fully aligned with the Carbon Border Adjustment Mechanism (CBAM), while simultaneously protecting Europe’s industrial base,” S&P Global quotes the coalition’s statement as saying.
Previously, German Chancellor Friedrich Merz criticized the EU Emissions Trading System. As reported by EcoPolitic, the market reacted with a sharp drop in emissions prices.
ETS supporters approach reforms with caution
Meanwhile, a group of Scandinavian industry associations bringing together producers from Norway, Sweden, Finland, and Denmark considers the EU ETS a key advantage for European businesses and a guarantee for the implementation of clean technologies. According to Euronews, in a letter to the European Commission they supported the ETS as “a market-based and technologically neutral policy instrument” that helps reduce carbon dioxide emissions.
These industry associations are convinced that the ETS is linked to the future prosperity of the European Union and could lead to decisive decarbonization of industry.
“The effective use of the EU’s own resources is key to achieving nearly all of the Union’s main strategic objectives, and these efforts require reliable access to both public and private financing,” the Scandinavian industrialists’ statement says.
Professor of Economics at the University of Venice Carlo Carraro considers attacks on the ETS to be harmful. In his view, this climate policy has already proven effective in regulated sectors:
“Innovation and competitiveness are now inextricably linked to decarbonization. Hindering the transition exposes businesses to increasing technological and financial risks and makes a country less competitive.”
At the same time, the European Environment Agency believes that the foundation for sustaining competitiveness in the current climate is accelerating the technological transformation of production.
Previously, EcoPolitic reported that due to high CO2 costs, European industry has been forced to operate in conditions of extremely high energy prices-twice as high as in the United States.
