In the run-up to the review of the European Union Emissions Trading Scheme (EU ETS), governments continue to put pressure on the EU authorities to relax carbon policy. Ten countries have issued a joint statement setting out a series of demands regarding the allocation of free allowances and, more generally, the postponement of the EU’s target for climate neutrality. They are also calling for a review of ETS2, which is not due to be launched until 2028.
According to Politico, Poland and Italy initiated the statement to the European Commission. They were joined by the Czech Republic, Estonia, Cyprus, Bulgaria, Hungary, Romania, Greece and Slovakia.
The countries are demanding fairly ambitious relaxations in the regulation of the carbon market. These include:
- lowering the linear reduction factor (LRF), which regulates the annual reduction of CO2 emissions allowances. Currently, for sectors covered by the EU ETS, the LRF should reach zero as early as in 2039. The European Commission proposed shifting this date to the 2040s. However, the signatory countries are pushing for a more radical change, calling to postpone the zero cap within the ETS until 2050 – when the entire EU economy is to achieve climate neutrality.
- extending the period for providing free emission allowances to those industries subject to the Carbon Border Adjustment Mechanism (CBAM). The countries propose to move the cut-off date beyond 2034;
- excluding international flights departing from the European Union from ETS coverage.
The yet-to-be-launched ETS2 has also come under fire from carbon market critics. As reported by Reuters, the countries urged a review of the introduction of the new CO₂ fuel emissions pricing mechanism.
These new provisions are set to come into force in 2028. They will establish, in particular, the cost of greenhouse gas emissions during the heating of buildings and transportation operations.
“European citizens should not face new climate taxes under current economic and geopolitical conditions. Therefore, ETS2 must be directly included in the legislative review and thoroughly reassessed,” the statement says.
Political message
Journalists believe that one aim of this letter is to demonstrate to European Commission President Ursula von der Leyen that, if these demands are not addressed, there are enough votes in the EU Council to block the proposals from the EU’s executive body.
In an interview with Politico, Polish State Secretary Krzysztof Bolesta stated that the countries are ready for constructive work on the EU ETS. At the same time, he described the document as a gentle reminder that, at any stage, they are prepared to resist.
Recall that the European Commission is set to present the EU ETS review on Friday, July 17.
EcoPolitic has published the likely aspects of the forthcoming changes to the carbon market. Among them are a fund of free allowances, the extension of the modernization fund, and concessions to slow down the pace of emissions reduction.
