The EU approves an unprecedented reform of the emissions trading system

The EU approves an unprecedented reform of the emissions trading system

Thirty hours of negotiations took place, but the EU institutions reached an agreement at dawn on Sunday that reforms from top to bottom the European emissions trading system, which since 2005 obliges the most polluting industries to pay for emitting greenhouse gases. greenhouse.

This system, under the principle that “the polluter pays”, limits the emissions of more than 10,000 installations with a high energy use (such as power plants and industrial plants), as well as the airlines that operate in the Twenty-seven (in addition to from Iceland, Liechtenstein and Norway). The industries included in this system must buy an emission permit for each ton of CO2 that they throw into the atmosphere and that is acquired through auction.

Now, with the new covenant, the system will change. Industry emissions must be reduced by 62% by 2030, compared to 2005 levels. To achieve this, there will be a total reduction of 90 million tons of carbon dioxide equivalent in 2024 and 27 million in 2025. Likewise, each emissions must be reduced by 4.3% from 2024 to 2027 and by 4.4% from 2029 to 2030. The reform is part of the legislative package known as FitFor55, which aims to reduce emissions by at least 55% pollutants during this decade.

One of the most important points of the pact is that it will put an end to what are known as free emission rights, which were assigned to some polluting industries to avoid what is known as carbon leakage, that is, sectors at risk of companies transferring their production to other regions with more lax environmental legislation. Polluting for free will end soon because rights will be reduced by 48.5% in 2030 and 100% in 2034.

There will no longer be free emission rights, and polluting imports will be taxed

These free rights will be adjusted in parallel to the new tax, also agreed this week between the European institutions, known as the border carbon adjustment mechanism. Legislation that is practically unique in the world, in which all companies from outside the European Union that want to sell a product in the Twenty-seven must pay the price of carbon that they emit with the manufacture of the product, according to the European ETS system. It will affect the iron, steel, cement, aluminum, fertilizer, and electricity and hydrogen generation industries. If you have already paid in the country of origin, it will be deducted upon entering community territory. The aim is to equalize the carbon price between Union and imported products, thereby limiting carbon leakage and encouraging reductions in global emissions.

After the agreement reached this Sunday, both the border adjustment mechanism and the end of free rights will fully enter into force in 2034.

Maritime transport will also be included in the new emissions trading system, although there will be exceptions depending on geographical specificities, as well as transitional measures between small islands or in the case of outermost regions, such as the Canary Islands, as well as public service obligations.

It is expected that by 2026 the European Commission will carry out an analysis to expand the municipal waste incineration sector in the ETS, with the aim that it begins to form part of it in 2028. Likewise, it is studied that by 2027 a second system of specific emissions trading for road transport and for buildings. Under the agreement, the fuel used in the manufacturing sector will also be part of the ETS from 2027, although it can be postponed a year later if energy prices are “exceptionally high”.

Industry emissions must be reduced by 62% in 2030 compared to 2005 levels

But the ecological transition has a cost, which is why an increase in the Innovation Fund has been agreed, a program financed through the ETS; as well as the modernization fund. But one of the keys to the pact is the creation of a new social fund for the climate, to help the citizens most affected by energy poverty with a financing of 86,700 million euros. Households, micro-enterprises and transport users will be supported.

To do this, the governments of the countries must present plans with measures to tackle the increase in prices for road transport and heating, as well as help for the renovation of buildings and electric vehicles. This new aid is expected to come into force in 2026.

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