Revision for phase 4 (2021-2030)
The European Commission presented in July 2015 a legislative proposal to revise the EU emissions trading system for the period after 2020.
This is the first step in delivering on the EU's target to reduce greenhouse gas emissions by at least 40% domestically by 2030 in line with the 2030 climate and energy policy framework and as part of its contribution to the new global climate deal.
Increasing the pace of emissions cuts
To achieve the at least 40% EU target, the sectors covered by the ETS have to reduce their emissions by 43% compared to 2005.
To this end, the overall number of emission allowances will decline at an annual rate of 2.2% from 2021 onwards, compared to 1.74% currently.
This amounts to an additional emissions reduction in the sectors covered by the ETS of some 556 million tonnes over the decade − equivalent to the annual emissions of the UK.
Better targeted carbon leakage rules
The proposal further develops predictable, robust and fair rules to address the risk of carbon leakage which may occur if production is transferred to countries with less ambitious climate policies.
- Revising the system of free allocation to focus on sectors at highest risk of relocating their production outside the EU – around 50 sectors in total
- A considerable number of free allowances set aside for new and growing installations
- More flexible rules to better align the amount of free allowances with production figures
- Update of benchmarks to reflect technological advances since 2008
It is expected that around 6.3 billion allowances will be allocated for free to companies over the period 2021-2030 − worth as much as EUR 160 billion.
Funding low-carbon innovation and energy sector modernisation
Several support mechanisms will be established to help the industry and the power sectors meet the innovation and investment challenges of the transition to a low-carbon economy.
These include two new funds:
- Innovation Fund – extending existing support for the demonstration of innovative technologies to breakthrough innovation in industry
- Modernisation Fund – facilitating investments in modernising the power sector and wider energy systems and boosting energy efficiency in 10 lower-income Member States
Free allowances will also continue to be available to modernise the power sector in these lower-income Member States.
Stakeholders were involved at various stages in the development of this proposal. Extensive consultations were carried out in 2014 both in the form of stakeholder events and a written consultation on post-2020 carbon leakage provisions. The Commission further organised a written consultation on the revision of the ETS for which it received more than 500 contributions.
Following these consultations and the analysis of EU climate policy targets for 2030, the Commission carried out an impact assessment of the ETS revision.
The legislative proposal has been submitted to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions for further consideration under the ordinary legislative procedure.
The public had the possibility to provide feedback on the legislative proposal after it was adopted by the European Commission. Feedback was received from 85 stakeholders.
The feedback was summarised and presented to the European Parliament and the Council.