As the EU Commission presented its proposal for a reform of the EU Emissions Trading System, which puts a price on carbon emissions in the energy sector, energy-intensive industries and European aviation one expert said the scheme has reacted to the global economic environment and pressure in business.

Under the scheme announced in Brussels, the allocation of new emission allowances will be phased out more gradually than previously planned; there will be a longer period of free allocation for firms facing particularly fierce global competition. This is balanced by new investment conditionalities designed to accelerate industrial decarbonisation. There are also new credits for firms that remove CO₂ from the atmosphere.

PIK Director Ottmar Edenhofer said caution was the watchword in the EC’s plans.

“With its proposal, the Commission is responding to the altered global economic and geopolitical situation. European industry needs greater flexibility when it comes to climate action – but it also needs a reliable framework that promotes investment and does not put pioneers at a disadvantage. The additional flexibility does not alter the EU’s overall climate policy course. Rather, the reform provides clarity on the contribution that the emissions trading is intended to make towards the 2040 climate target.”

“Opening up emissions trading to permanent carbon dioxide removals from the atmosphere is an important step. For the first time, it creates a credible and long-term investment framework for carbon removal technologies in Europe. Simultaneously, negative emissions offer a way to compensate for industrial emissions that are difficult to avoid. Emissions trading is thus consistently aligned with climate neutrality.”

He added: “The Commission is deliberately taking a cautious approach to the question of integrating international credits – provided for in the Paris Agreement to account for climate protection efforts outside the EU – into the EU Emissions Trading System. This is understandable in light of past experience. However, Europe should keep a close eye on this option. If designed wisely, emissions trading could become the starting point for a new generation of high-quality climate partnerships, strengthening European climate policy geopolitically.”

“With this proposal, the Commission has set the course for emissions trading up to 2040. Political negotiators must now decide how it will be implemented: the European Parliament and the Council must agree on a reliable framework that signals industry to move forward and promotes investment in climate neutrality. Member states, in turn, are called upon to create the conditions for industrial transition, for example through infrastructure expansion and competitive electricity prices.”

The European Commission’s Teresa Ribera executive vice-president for a Clean, Just and Competitive Transition said at the launch of the trading system: “Recent weeks, and last Wednesday in particular, have provided a stark reminder of the consequences of climate change. Climate change means destruction: for our economy, our society and our infrastructure.

“Europe is committed to achieving climate neutrality by 2050. We are a continent that has been driving climate action for at least 20 years. It is on the basis of that experience that we are presenting updated proposals today: proposals that draw lessons from the past, look towards the future and enable us to act more effectively.

“The economics of climate action also shape our competitiveness, resilience and capacity for innovation.

“For 20 years, we have worked to mainstream climate action across all our policies. Today, I am here with Commissioners Hoekstra and Jørgensen to present the review of the Emissions Trading System, the Electrification Action Plan and the proposal on future-proof electricity bills.

Together, these initiatives will help us consolidate everything we have achieved in recent years while ensuring that what remains to be done stays within our reach.”

She continued: “Green is cheaper and wiser. Dependency is expensive.

“We know that decarbonisation is the best economic and security strategy for Europe. It strengthens our competitiveness, reduces our dependence on imported fossil fuels and makes our economy more resilient.

“These are the principles at the heart of this mandate and of the Clean Industrial Deal.

“Emissions trading makes polluters pay while generating the revenues needed to invest in our future. Together, these initiatives point Europe’s economy in one clear direction: towards a future that is cheaper, greener, fairer, more competitive and more secure.”

“The Emissions Trading System is our flagship climate instrument,”  Ribera explained. “It has been 20 years since Europe first introduced an emissions trading system. It works well and provides an efficient framework for directing investment towards more sustainable solutions.

“After 20 years, it is right to draw lessons from our experience and ensure that the system remains a driving force for the next 20 years.

“These two decades have demonstrated how effectively emissions can be reduced in the sectors covered by the ETS, particularly in the power sector.

“The ETS has generated €270 billion for investments in Europe’s decarbonisation and has produced a positive ripple effect across the world.”

“Recent weeks, and last Wednesday in particular, have provided a stark reminder of the consequences of climate change. Climate change means destruction: for our economy, our society and our infrastructure.’’

Teresa Ribera, European Union Commission