EU Emissions Trading System to be revised to go in line with the Paris Agreement

The EU has reached a provisional agreement to revise its Emissions Trading System (EU ETS) for the period after 2020 - a crucial move amid the ongoing climate negotiations in Bonn.

Following the proposal from the European Commission (EC) to revise the EU ETS in July 2015, the European Parliament and the Council embarked on two years of negotiations to increase the EU carbon price and reduce emission allowances. The EC proposal had argued that the sectors covered by the ETS have to reduce their emissions by 43% compared to 2005.

For this target to be achieved, the overall number of emission allowances will decline at an annual rate of 2.2% from 2021 onwards, compared to 1.74% currently. This reduction rate amounts to an additional emissions reduction in the sectors covered by the ETS of approximately 556 million tonnes over the decade between 2020 and 2030 − almost equivalent to the annual emissions of the UK.

Miguel Arias Cañete, Commissioner for Climate Action and Energy said: "Today's landmark deal demonstrates that the European Union is turning its Paris commitment and ambition into concrete action”. He added: “By putting in place the necessary legislation to strengthen the EU Emissions Trading System and deliver on our climate objectives, Europe is once again leading the way in the fight against climate change”.

Although details haven’t been revealed, the main improvements will see the speed up of emissions allowances reductions and the strengthening of the Market Stability Reserve, a short-term measure that had been taken by the EU to reduce the oversupply of allowances on the carbon market. It will also provide measures to provide the European industries with extra protection against the risk of carbon leakage and set up several support mechanisms for the power sector to meet innovation and investment challenges that result from the energy transition. These are expected to include an Innovation Fund to support innovative technologies and a Modernisation Fund to facilitate investments in 10 lower-income Member States.

Jochen Flasbarth, German state secretary for environment told the Clean Energy Wire that the agreement was a great signal for the ongoing climate negotiations in Bonn. “Our ambition and what we have achieved so far is more than in other regions with relevant emitters – China and the US”. “I believe that now we show we’re capable of making decisions and implementing them and this is good for the COP”.

However, he warned that higher carbon prices are not a ‘solution to it all’ for EU’s climate policy stressing that, for example, in order to switch from carbon-heavy coal to cleaner gas “a separate national policy is required.

The new EU ETS agreement will have to be formally approved by the European Parliament and the Council, and once approved it will be made publicly available.

You can check the proposals the European Commission has made in 2015 here.


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