In carbon markets such as the EU ETS participants must monitor and report their emissions and ultimately pay for them. Biomass occupies a unique place. It is well positioned to be a net-zero emissions energy source for hard-to-abate sectors. Coupled with effective on-site carbon capture technologies, it can be carbon negative. And there is a great diversity of project types involving forestry, biochar kilns, waste-to-energy, carbon capture and … [Read more...]
EU ETS or national climate targets? We need both
The choice between using the EU ETS or national climate targets to decarbonise is a false dilemma. We need both, explains Chiara Corradi at T&E writing for the Florence School of Regulation. There are plenty of examples where a carbon market and national targets have delivered good results together, as in Germany, Finland, Denmark and Portugal. And, looking ahead over the next few decades, the right policies should be able to cope with ETS … [Read more...]
U.S. and EU: vastly different approaches to trade and climate put a transatlantic deal at risk
Uncertainty over the results of this year’s elections in the U.S. and the EU have effectively postponed trade deals between the two blocks. That means when talks restart in 2025 there will be even less time to find the best compromises. As Gautam Jain, Noah Kaufman, Chris Bataille and Sagatom Saha at the Center on Global Energy Policy explain, it’s why this time should be taken to better understand the differences and lay out the possible … [Read more...]
Buying carbon allowances while decarbonising: what’s the best strategy for an EU industrial firm?
EU industrial companies affected by the big changes to their carbon costs that come from the new EU ETS rules and the Carbon Border Adjustment Mechanism (CBAM) must create strategies to deal with them, if they haven’t started already. Otherwise they will fall behind those that have. Pablo Ruiz at Rabobank summarises their analyses and conclusions. Ruiz presents a map for each of the different starting positions. The study looks at the critical … [Read more...]
Why we need a European Central Carbon Bank within the EU ETS framework
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 is 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...]