The EU Emissions Trading System (EU ETS) is at a critical juncture as it navigates a path towards achieving a net-zero Europe by 2050. Amidst this transformation, the proposal to create the European Central Carbon Bank (ECCB) has sparked a range of criticisms. Some critics have raised valid concerns about the feasibility, necessity, governance, and potential drawbacks of such an institution. Robert Jeszke and Sebastian Lizak at the Centre for … [Read more...]
How much protection from carbon-intensive imports will CBAM give to EU industries?
The EU’s Carbon Border Adjustment Mechanism (CBAM) is not a business-as-usual instrument that allows sectors to delay decarbonisation. It applies a levy on imported goods equal to the internal EU ETS-related carbon price, so that both EU-produced goods and those imported into the EU face similar carbon cost pressures. But sectors must use the CBAM phase-in period to decarbonise. Pablo Ruiz and Barbara Kölbl at Rabobank look at how different … [Read more...]
CBAM is now active. A guide to what companies must do to comply
On October 1st 2023 the Carbon Border Adjustment Mechanism (CBAM) became effective. Its purpose is to limit carbon leakage by establishing a carbon price on imported goods that is equivalent to the carbon price on domestically produced goods. That means introducing a set of reporting and compliance obligations for importers of goods into the EU. Simon Göss and Hendrik Schuldt at carboneer explain the new mechanism and scope (aluminium, cement, … [Read more...]
Carbon Pricing: almost 25% of emissions now covered globally, but coverage and prices must rise further
Despite early scepticism, carbon pricing is making its mark globally. Today almost a quarter of global greenhouse gas (GHG) emissions are covered by a carbon price, compared to just 7% ten years ago. 73 national and sub-national jurisdictions have carbon pricing, explain Joseph Pryor and Venkat Ramana Putti at The World Bank, writing for the Florence School of Regulation and quoting from the World Bank’s State and Trends of Carbon Pricing 2023 … [Read more...]
Understanding the new EU ETS (Part 2): Buildings, Road Transport, Fuels. And how the revenues will be spent
A fortnight ago we published Simon Göss’s explainer of the big changes happening to the EU’s Emissions Trading Scheme (ETS). That article covered the new rules coming in for the existing EU ETS, and the implementation of the new carbon border adjustment mechanism (CBAM). This article explains the introduction of an EU ETS II that extends emissions trading to the buildings sector, road transport and the usage of fuels in other, as of now not … [Read more...]
EU ETS and CBAM: what the big update to emissions trading rules means for Europe’s key sectors
The EU’s Emissions Trading Scheme is a vital part of the region’s decarbonisation plans. Simon Göss at carboneer digs into the new rules coming in for the existing EU ETS, and the implementation of the new carbon border adjustment mechanism (CBAM). Right now, the existing EU ETS covers around 40% of the EU’s emissions (energy sector, industrial installations and aviation). Its scope is being extended to include maritime transport. On top of that, … [Read more...]
Project Air: building a first-of-a-kind, large-scale sustainable methanol plant for the chemicals industry
Project Air is creating a first-of-a-kind, large-scale sustainable methanol plant. It uses CCU for converting CO2, residue streams, green hydrogen and biomethane into methanol. It’s a collaboration between specialty chemicals innovator Perstorp (Sweden) and energy firms Fortum (Finland) and Uniper (Germany). Perstorp aims to be the first chemical producer to replace all fossil-based methanol for its European production facilities (200,000 tons … [Read more...]
Russia-Ukraine crisis: reforming the EU ETS is a matter of energy security, says PGE
European leaders are now rushing to make decisions on how to drastically cut dependence on Russian fossil energy imports. Russia’s invasion of Ukraine has exposed Europe’s energy security vulnerabilities like nothing else could have. It also means Europe’s clean energy transition will need an overhaul, and a newly designed optimal pathway created, and fast. Wojciech DÄ…browski, President at PGE Polska Grupa Energetyczna, explains that it must also … [Read more...]
Don’t let high gas prices stop the EU ETS from doing its real job
The EU ETS carbon price reached a high of over €60 per tonne in September. Some are arguing that its role in the current gas price crisis is a reason why it should be reined in. But Milan Elkerbout at CEPS Policy Insights explains that the EUA (European Union Allowance) has multiple purposes. It is an incentive to invest in low-carbon solutions such as renewables, efficiencies and new methods. The sooner we pass the cost hurdle of integrating … [Read more...]
Land Use and Forestry: existing LULUCF rules allow EU’s carbon sink to decrease. Change them
The EU’s current Regulations for Land Use, Land Use Change and Forestry (LULUCF) allow the region’s carbon sink to decrease, explains Ulriikka Aarnio at CAN Europe. It’s due to exclusions and a lack of transparency and proper accounting for emissions. As a result, the EU’s carbon sink has already decreased significantly in the last few years, extracting only 265 Mt of CO2 in 2019. Different activities both emit and absorb carbon. 2019 saw 135 Mt … [Read more...]
China’s energy system: record renewables expansion, but coal still dominates
Lara Dombrowski and Simon Göss at Energy Brainpool give the latest headline figures for China’s energy system. In 2020 electricity generation in China went up by 298 TWh – an increase equal to 60% of Germany’s total. That year, renewables capacity increased more than ever before. That made China responsible for nearly 50% of global renewable capacity additions. But China has higher CO2 emissions than all the OECD countries combined. And continued … [Read more...]
Changes to national targets and forestry mean EC’s 55% plan is weaker than it looks
The EC’s plan to reduce the bloc’s emissions by 55% by 2030 compared to 1990 levels, instead of the previously agreed 40%, is very welcome but its implementation plan is flawed, says William Todts at Transport & Environment. The EU Emissions Trading System (EU ETS) won’t be enough on its own. So the plan allows nations to include “managing” forests and “tree plantations”, a big change because forests were not part of previous emissions … [Read more...]
Europe’s 55% emissions cut by 2030: proposed target means even faster coal exit
The EC is proposing a target emissions reduction of 55% by 2030 compared to 1990 levels, instead of the previously agreed 40% (which the EU is on course to surpass). The main tool for achieving it will be the EU Emissions Trading System (ETS). Prices for allowances will rise, making coal increasingly uncompetitive. Sören Amelang, Kerstine Appunn and Julian Wettengel at CLEW talked to a number of experts who say the new target implies a near total … [Read more...]
California learns even flexible Emissions Markets won’t guarantee price stability
In May, emissions allowance prices hit rock bottom in California. How can cap-and-trade work properly when prices are so volatile and difficult to predict? It makes life very difficult for businesses and investors, not to mention the state. Changes to the rules are being proposed to introduce more flexibility into the effective price floors, ceilings and the availability of allowances. But Severin Borenstein at the Energy Institute at Haas … [Read more...]
EU ETS: The Market Stability Reserve should focus on carbon prices, not allowance volumes
The Market Stability Reserve (MSR) aims at providing carbon price stability for the EU Emissions Trading Scheme (EU ETS). But serious questions are being asked about how much stability – if any – it provides, say Michael Pahle at the Potsdam Institute for Climate Impact Research and Simon Quemin at the LSE's Grantham Research Institute. They argue that the MSR rules are too complex, have difficulty accommodating changing EU and national policies, … [Read more...]
