KEY MESSAGES
- The introduction of the intermediary 2040 net emissions reduction target in view of reaching the climate neutrality ambition enshrined in the Climate Law, is a decisive step in setting the path that sectors across the economy are expected to follow. Thus, it must be ensured that the level of ambition of the EU Emissions Trading System (EU ETS) and, particularly ETS I, which is a key decarbonisation driver, is aligned with overall climate targets.
- Upcoming reviews and policy developments with regards to the post-2030 architecture must:
- ensure a fair distribution of climate targets between ETSI, ETS II and non-traded sectors, as well as across Member States and greenhouse gases (GHGs).
- proactively address the system’s functionality to mitigate market volatility, prevent abnormal price surges and discourage excessive banking of allowances, as the cap approaches zero.
- maintain a strong market-based EU ETS, and seek to minimise market distortions and the risk for ad-hoc political interventions.
- consider the market liquidity and optimal functioning of the EU ETS and ensure that the Market Stability Reserve (MSR) and its parameters are fit for purpose and reflect the new market conditions.
- mitigate the potential risk of unintended volatility and preserve the environmental integrity of the EU ETS, in the event of sectoral and/or geographical expansion.
- make sure collected revenues prioritise meaningful decarbonisation projects. Additionally, simplifying and speeding up state aid procedures regarding the use of EU allowances (EUA) revenues, as well as more accountability on the use of collected revenues by Member States is needed.
- The EU ETS should remain the primary mechanism for achieving net-zero emissions. Predictability over the long-term evolution is key for ensuring necessary decarbonisation investments and cost-effective emissions reductions, as well as meaningful, long-term carbon price signals.
- The Carbon Border Adjustment Mechanism (CBAM) and EU ETS have to work hand in hand to ensure they properly incentivise domestic carbon intensive industries to decarbonise in a competitive manner, while stimulating international collaboration to deliver on global decarbonisation ambitions.
- Eurelectric is supportive of linking with neighboring carbon markets of equivalent ambition. In particular, we encourage linking with the UK by COP30 to support the functioning of electricity interconnections outside the European Economic Area (EEA) and exhibit international climate cooperation.