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...]
Industry’s EU ETS reforms and CBAM: how firms can turn the rising cost of carbon into competitive advantage
Changes to the EU ETS mean free emissions allowances (EUAs) for industry will be gradually phased out as the Carbon Border Adjustment Mechanism’s (CBAM) CO2-related levy will be inversely phased in. It means the carbon costs for industry in the EU will significantly rise. Pablo Ruiz at Rabobank takes a deep dive to assesses the magnitude of these changes and their implications for the main industrial sectors, and the main change drivers for … [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...]
Aviation emissions: don’t wait for CORSIA. Strengthen EU ETS and Fit-for-55
The European Aviation Safety Agency (EASA) has projected growth in flights of 40% between 2018 and 2035. So how do we reduce aviation emissions? The global implementation of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) remains low. Meanwhile, Europe’s EU ETS has helped reduce the sector’s emissions by around 17m tonnes of CO2eq per year - but it did not bring a net decrease in emissions. Technological progress … [Read more...]
Aviation policy alert: non-CO2 emissions have up to four times the climate impact
There’s little point designing CO2 policies without knowing what other factors are heating up the atmosphere. So it is with aviation. The non-CO2 emissions (aromatics, NOx, SO2, H2O, particulate matter, etc.) from jet engines have up to four times the effect of CO2. You can see it in the contrail cirrus streaks trailing behind aircraft. Carlos LĂłpez de la Osa at Transport & Environment summarises their recent summit that brought together … [Read more...]
“Options to Reform the EU ETS”: coping with price volatility and speculation (event summary)
Sara Stefanini provides a written summary of our panel discussion held on 31st March 2022, “Options to Reform the EU ETS”. It’s a full summary of the 90 minute discussion (with a link to the video), but it begins conveniently with a summary of the highlights, leading with the role of financial players, who they are, the causes of price volatility, what reforms can create stability, and the cost of decarbonisation. The main concern is speculation … [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...]
If Buildings Renovation fails, the EU ETS pricing mechanism must change
If the EU “Renovation Wave” for buildings fails, the massive ramp up of clean electrification required to compensate will come into direct conflict with EU ETS pricing formulas, say Sebastian Osorio and Michael Pahle at the Potsdam Institute for Climate Impact Research and Oliver Ruhnau at the Hertie School in Berlin. If the cap in the original ETS is too tight relative to the Effort Sharing Regulation (ESR) targets, its carbon prices may rise … [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...]
EU “Fit for 55”: how it impacts the EU ETS to accelerate emissions reductions
Christoph Kellermann, Lun Zhou and Simon Göss at Energy Brainpool explain how the EU’s new “Fit for 55” proposals, released in July, will impact the EU Emissions Trading Scheme (EU ETS), hailed as one of the most effective ways of reducing emissions. The authors cover the changes to the existing ETS, the planned new ETS for road transport and buildings, the controversial Carbon Border Adjustment Mechanism (CBAM), and the new CO2 standards for … [Read more...]
‘Fit for 55’ should prioritise decarbonisation of laggards: buildings, transport, industry, agriculture
Today’s long-awaited "Fit for 55" legislative package from the European Commission will trigger intense and difficult negotiations that will last two years, says Nicolas Berghmans at IDDRI. Its scope is wide and inevitably interconnected. The twelve legislative proposals include adjustments to existing measures (renewable energy, energy efficiency, carbon market/EU ETS, energy taxation, climate effort sharing between Member States/ESR, land use … [Read more...]
The EU’s “Fit for 55” package: a primer on the EU ETS and other main policy levers
On July 14 the European Commission will present the much awaited “Fit for 55” legislative package. Lara Dombrowski and Simon Göss at Energy Brainpool have written a very useful primer on what’s at stake for the EU ETS, along with a summary of the other main policy levers that will be decided upon. The authors describe the EU ETS as the central instrument for reducing greenhouse gas emissions. It caps emissions for 10,000 power sector, industrial … [Read more...]
