Revision of the EU emissions trading system

Key points

The EESC:

• welcomes the Commission’s proposal to review the EU Emissions Trading System (ETS) in light of the Union’s 2040 climate target, the Clean Industrial Deal and the objective of strengthening Europe’s competitiveness and energy security. The ETS has been a central driver of emissions reductions;
• considers that the review should preserve the environmental integrity of the ETS while improving its ability to support European industrial competitiveness and quality employment;
• supports maintaining a predictable long-term emissions trajectory. Adjustments to the Linear Reduction Factor, the Market Stability Reserve (MSR) or other structural parameters should be aligned with the 2040 climate target, preserve investor confidence and ensure that the ETS delivers 85-90% domestic emission reductions by 2040;
• supports introducing conditionality for and gradually phasing out free allocation. Free allocation should remain targeted at sectors genuinely exposed to carbon leakage;
• considers ETS revenue one of Europe’s most important sources of financing for the clean transition;
• stresses that decarbonisation will only succeed with a just transition;
• supports adapting the MSR to a tightening market. It should remain rules-based, transparent and predictable, while reducing excessive volatility without creating a discretionary price target;
• supports the inclusion of robust permanent carbon removals while keeping gross emissions reductions as a priority;
• is not in favour of including international credits in the ETS, as this would divert revenue that could otherwise be invested in decarbonising European industries away from the EU;
• calls for aviation to make a fair and progressively increasing contribution to the Union’s climate goals;
• welcomes the gradual integration of municipal waste incineration into the ETS;
• acknowledges that European industrial sectors face high energy prices, international competition and significant investment needs;
• notes that the proposal leaves key details to be resolved through delegated and implementing acts and recommends that key requirements be stated clearly in the directive where possible.