Economic Impact of the Implementation of the EU Emissions Trading System (ETS)

Key points

The EESC:

• shares the general objectives of EU’s emissions cap-and-trade system (Emissions Trading System - ETS), in its role in achieving a green, low-carbon economy;
• observes, however, that the design and implementation of the system should take into account its consequences for jobs in Europe, as well as its social impact. A thorough analysis and assessment of the impact on sectors, value chains, regions and countries is required, based on a commonly agreed comprehensive methodology;
• underlines the need to strike an appropriate balance between achieving general environmental objectives and, at the same time, not creating economic distortions or undermining the competitiveness of the European economy. The Commission’s economic analysis needs to be significantly improved in this regard;
• points out that the ETS mechanism presents a number of critical implications regarding compliance costs and potentially distorting effects, as well as imposing an excessive administrative burden;
• believes that any measure aimed at driving the decarbonisation of the shipping industry should ideally be global in nature, not regional or unilateral, in order to avoid carbon leakages. In this respect, the EESC strongly supports the work being done at the International Maritime Organization (IMO) – particularly its Net-Zero framework, which could also prevent double regulation or double payments;
• supports the simplification of the Carbon Border Adjustment Mechanism (CBAM) mechanism recently tabled, seeing it as a step forward in terms of balancing the need for environmental protection, on the one hand, and the concurrent need to reduce the administrative burden on the economy and its businesses, especially SMEs;
• warns that the ETS may create a significant disincentive to invest in EU ports, bringing about a competitive imbalance between Mediterranean ports located in EU Member States and nearby competing ports in third countries, especially those located in North Africa;
• observes that the economies of islands, such as Malta, Cyprus and Ireland, and of Member States strongly focused on shipping and maritime activities might experience pressures on their economies due to the application of the ETS mechanism.