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22.11.2017 16:48
The Council endorsed the deal on the reform of the EU ETS

  • © Les Haines,

The Council endorsed the provisional deal reached between the Estonian presidency and the European Parliament on the reform of the EU emissions trading system (ETS) for the period after 2020, according to a press release by the European Council. The agreed text will now be submitted to the European Parliament for approval.
The ETS reform will help the EU to deliver on its target of cutting greenhouse gas emissions by at least 40% by 2030, as agreed under the 2030 climate and energy framework and the Paris Agreement.
In addition to contributing to emission reductions in a cost-effective way, the reformed system will encourage innovation and promote the use of low-carbon technologies. In doing so, it will help create new opportunities for jobs and growth while preserving the necessary safeguards to protect industrial competitiveness in Europe.
The revision will strengthen the EU ETS through the introduction of, the following elements:
- lower cap on the total volume of emissions;
- temporary increase of market stability reserve (MSR) allowances;
- а new mechanism limiting the validity of allowances in the MSR above a certain level;
- new ETS directive provisions will be kept under regular review.
The revised ETS contains a number of provisions to protect industry against the risk of carbon leakage and avoid the application of a cross-sectoral correction factor (CSCF):
- the share of allowances to be auctioned will be 57%, with a conditional lowering;
- free allocation rules have been updated;
- the sectors at the highest risk of relocating their production outside the EU will receive full free allocation, while the free allocation rate for sectors less exposed to carbon leakage will amount to 30%;
- the new entrants' reserve (NER) will initially contain unused allowances from the current 2013-2020 period and 200 million allowances from the MSR (unused allowances for the 2021-2030 period will be returned);
- member states can continue to provide compensation for indirect carbon costs in line with state aid rules.
A key objective of the revised ETS is to help industry and the power sector to meet the innovation and investment challenges of the transition to a low-carbon economy. The following funding mechanisms will be created for this purpose: 
- the existing NER300 facility will be renewed, providing continued support for low-carbon innovation in renewables and Carbon Capture and Storage projects and now called the Innovation fund, its scope will be extended to industrial sectors (including Carbon Capture and Utilisation);
- a modernisation fund will be financed by auctioning 2% of the total allowances to foster energy efficiency and the modernisation of the energy sector in member states with a GDP per capita below 60% of the EU average. Energy generation projects using solid fossil fuels will be excluded except for district heating in member states with a GDP per capita below 30% of the EU average in 2013;
- low-income member states will also be able to modernise their energy sector up to a limit of 40% of the allowances for auctioning which can be increased to 60%.

TAGS: EU | European Council | European Parliament | emission trading system | ETS | greenhouse gases | carbon emissions | carbon dioxide | Paris Agreement | energy | climate | revision | ETS directive | allowances | allocation | mechanisms | modernisation fund | energy efficiency | renewables 

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20.03.2022  Teodor Bobochikov, Managing Partner, V-Ridium
Energy Transformation – Trends and drivers
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