Climate change: Agreement in the EU for the reform of the emissions market

The governments of the European Union (EU) agreed on Sunday, December 18, to put in place an agreement to reform the emissions trading system with the aim of further reducing industrial and heating emissions. and cars and to highlight the transition to green energy.

After several hours spent negotiating and finding common ground satisfactory to all parties, the EU has finally reached an agreement to meet the challenges imposed by climate change and which will allow industries to invest in green technologies.

According to the press release from the European Parliament, the European Emissions Trading System (ETS), which is dedicated to the “polluter pays” principle, is at the heart of European climate policy and necessary to achieve the objective of EU climate neutrality. By putting a price on greenhouse gas (GHG) emissions, the ETS has led to significant reductions in EU emissions, as industries are incentivized to reduce their emissions and invest in climate-friendly technologies .

As a result, emissions in the ETS sectors must be reduced by 62% by 2030, compared to the year 2005, ie one point more than what the Commission is proposing. In order to achieve this reduction, EU members will impose a one-off continent-wide reduction in the amount of allowances of 90 Mt of CO2 equivalents in 2024 and 27 Mt in 2026, combined with an annual reduction quotas of 4.3% between 2024 and 2027 and 4.4% from 2028 to 2030.

The note states that by 2025, ” the Commission will assess the risk of carbon leakage for goods produced in the EU intended for export to third countries and, if necessary, ” present a WTO-compliant legislative proposal to address this risk“. In addition, it reveals that approximately 47.5 million allowances will be used to raise new and additional financing to address any risk of carbon leakage linked to exports.

As for fuels for road transport and buildings, the agreement will put a price on the emissions of these sectors and which will be established by 2027. The ETS II could be postponed until 2028 to protect citizens, if the energy prices are exceptionally high. The talks notably led to the establishment of a new price stability mechanism to ensure that if the price of an allowance in the ETS II exceeds EUR 45, 20 million additional allowances will be released.

To further demonstrate their commitment and ambition to transition to green energies, the European Parliament and the EU will invest more in terms of innovative technologies and to modernize the energy system. In this sense, the Innovation Fund will increase from 450 to 575 million current allowances while the Modernization Fund will increase by 2.5% through auctioning while extending the ETS, for the first time, to transport maritime.

EU countries must also measure, report and verify emissions from municipal waste incineration facilities from 2024 noting that by 31 January 2026 the Commission will present a report with the aim of including these facilities in the EU ETS from 2028 with a possibility of opting out until 2030 at the latest.

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