Carbon markets: Emergence, structuring and challenges for European industry (own-initiative opinion)

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Key points:

  • Numerous carbon markets are functioning in the world and the EU Emissions Trading System (ETS) is not working in isolation.
  • These local carbon markets should be monitored by the European Commission in order to identify the best practices that could be useful for revising the ETS and the directive on energy.
  • This knowledge and understanding of other carbon markets is also key for calibrating the Carbon Border Adjustment Mechanism, which should apply differently to countries with carbon markets and countries without carbon markets.
  • The ongoing COVID-19 pandemic cannot slow down action on climate change, either at the European or international level. That means that the European Green Deal should be put in place in line with the planned timetable.
  • The slightest delay takes us away from the goal of carbon neutrality by 2050. More importantly, recovery packages must be aligned with the EU climate goal and have to be harmonised with the objective of the European Green Deal.
  • The EESC considers that the adoption of Article 6 of the Paris Agreement is a key opportunity to strengthen climate action post-2020. Therefore, the EESC asks the EC to obtain a clear mandate from Member States to reach the necessary compromise for the adoption of Article 6 guidance during COP26 in 2021.
  • The EESC supports the Green Deal policy and asks the EC to table the various proposals planned in the coming months, including the one on the Carbon Border Adjustment Mechanism. Such a mechanism could bring a level playing field for the most CO2-intensive sectors in the EU.
  • As the EU explores future modifications to its ETS, significant and close attention should be paid to market design and operationalisation experiences across North America's subnational emissions trading regimes.
  • The EESC supports opening up dialogue with third countries in order to discuss the content and the impact of carbon border measures on their exports to the EU. This dialogue should take a different form with countries that have ambitious climate policies (like Canada) than with others without such ambitious climate policies (the United States, China, Russia).
  • The EESC insists on the need to combine and harmonise the various available tools in order to combat the climate crisis and pleads in favour of a harmonisation of approaches, ultimately leading to the emergence of a comparable price signal across different jurisdictions.