European Commission proposes changes to EU emissions trading system
How left and right are reading this
- Both agree
- The overhaul accepts that ETS design will shape both emissions cuts and industrial behavior, making the pace of tightening consequential for the EU’s 2040 climate path.
- They split on
- Whether the story is about climate ambition being weakened by slower permit cuts, or climate policy being kept economically credible by easing pressure on industry.
The Facts
- The European Commission proposed an overhaul of the EU Emissions Trading System on July 17.
- The proposal would slow the rate at which the ETS emissions cap declines after 2030, meaning carbon permits would be reduced more slowly than under current rules.
- Under the proposal, the annual cap reduction rate would move to 3.7% in 2031 and 1.7% from 2036, compared with a higher rate under current rules.
- The ETS applies to major emitters including power plants and energy-intensive industrial sectors, and sources also describe coverage of aviation and shipping.
- The Commission's plan would allow some industries to keep receiving free emissions allowances for longer, linked to decarbonization or clean-technology investment.
- The overhaul is intended to balance the EU's climate goals with concerns from industry and some member states about competitiveness, high energy costs, plant closures and production shifting خارج the EU.
- The reform is part of adapting the ETS to the EU's 2040 climate target, which aims to cut net emissions by 90% compared with 1990 levels.
- The proposal remains politically contested and will be debated within the EU, with some governments seeking more flexibility and others arguing the carbon market's strength should be preserved.
Analytical frames for this storyTap to explore
Context
What is the EU Emissions Trading System?
The ETS is the EU's carbon market, created in 2005, that requires covered companies to hold permits for their CO2 emissions while the total number of permits is capped and reduced over time to drive emissions down ZEIT ONLINE,Reuters. It covers major emitting sectors such as power generation and heavy industry, and sources also describe aviation and shipping as part of the system El Confidencial,Reuters.
What would change under the Commission's proposal?
The Commission wants to slow the post-2030 decline in available permits, with the annual reduction rate set at 3.7% in 2031 and 1.7% from 2036, and to let some industries keep free allowances for longer if they invest in decarbonization or cleaner technology infobae,BFMTV,Reuters.
Why is the EU revisiting the carbon market now?
Sources say the review is meant to align the ETS with the EU's 2040 climate target while also responding to pressure from industries and member states that say high energy costs and foreign competition are straining European manufacturing DIE WELT,Reuters,ZEIT ONLINE.
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Wire services (15)
ReutersGlobal Banking & Finance ReviewEU's Plan to Overhaul Carbon Market: Emissions, Permits & Fu...
ReutersGlobal Banking & Finance ReviewEU Emissions Trading System Explained: How the EU ETS Works ...
APInternational Business Times, Singapore Edition10 EU Countries Push to Delay Carbon Fuel Price Ahead of Emi...
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