The European Commission proposed an overhaul of the EU’s Emissions Trading System (ETS) yesterday, allowing industries to emit CO2 longer while offering more financial support to invest in clean technologies in Europe.
The ETS is the European Union’s biggest climate change policy. It forces power plants, airlines and shipping firms to buy permits when they emit CO2, and caps their overall emissions.
The long-planned ETS overhaul aims to extend the system into future decades and align it with the EU’s 2040 climate goal to cut net emissions by 90 per cent.
It also softens the scheme in response to pressure from industries and countries, including Italy and Poland, which say it undermines competitiveness.
Brussels is attempting to balance those concerns with warnings, including from Spain, that weakening the ETS would punish industries that spent early on cutting emissions.
The Commission proposed cutting the annual rate at which the ETS emissions cap falls to around 3.7pc from 2031, and 1.7pc from 2036, from 4.3pc currently, confirming plans previously reported by Reuters.
It would also set a new requirement for national governments to spend half of their ETS revenue on decarbonising local industries.
The ETS has generated €260 billion ($297bn) in revenue since 2013.
“If we deliver on this plan, it would literally mean hundreds of billions in additional investments on European soil,” EU Climate Commissioner Wopke Hoekstra said.
The EU gives industries some EU CO2 permits for free to help them compete with foreign rivals.
The Commission proposal would give industries more free permits for longer – but with new conditions attached.
The EU would give 80pc of the free permits upfront to companies with plans to invest in decarbonisation in Europe.
Companies would get the remaining 20pc once they make those investments.
The proposal would continue free permits until 2038 for sectors including steel and cement manufacturing rather than ending them in 2034, when they were due to be replaced by the EU’s carbon border charge on imports.
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