It is a pleasure to talk about this issue. It's not the first time I talk about the issue because it's one of the most debated issues in the international scene over the last year and a half - two years. If we are going to do what we promised, or what we’re legally obliged to do, the European Union which is to reach climate neutrality in 2050, and reduce our greenhouse gas emissions by at least 55% by 2030, we need to really change many of our policies. But at the end, the core of any policy to decarbonise your economy is to put a price on carbon.

So one of the most powerful and effective tools we have to bring down emissions in Europe is our Emissions Trading System. The principle is very simple as you know, we put a price on CO2 emissions, we create a strong price signal for green investments, and we spur the markets to develop cost-efficient solutions. At the same time, the revenues generated by the system can be used to address social impacts, or to finance innovation.

We know that carbon pricing works. The system currently covers 45% of all EU emissions and applies to around 10,000 installations in the power sector and manufacturing industry, as well as to over 500 airlines. Since its introduction in 2005, emissions from the ETS sectors have been cut by around 43%. Some of us will remember that when we voted the ETS system back then there was a lot of resistance. In initial years there was a lot of scepticism, even a lot of criticism; it didn't work, the price was too low. But I don't think that applies any longer.

I think it's making school, because besides the European system, Canada, China also, Japan, New Zealand, South Korea, Switzerland, and parts of the United States are either operating or developing their own systems. Under the Green Deal we want to revise and strengthen the system, we will also want to extend it to new sectors because ETS has proven itself to be effective as a tool for reducing emissions and in some non-ETS sectors we've not had the same level of success so far. Just to mention transport where emissions are still going up instead of down.

We will apply a new Emissions Trading System domestically for road transport and building fuels, as we need to make emissions cuts in those areas. Let me be very clear, especially in the presence of members of the European Parliament also, we believe this system could work. The goal is to reduce emissions and to create more energy efficient buildings. If there are alternatives that will lead to the same result, we will certainly study them, we are not tying our fate to an ETS system, but in all our analyses the ETS system gives us the best result and gives us the best opportunity to compensate our citizens for potentially higher energy prices. Potentially I say because the onus will be on the producers of the energy first and foremost. And to avoid the trap of energy poverty.

I believe, especially with the creation of the Climate Social Fund. We made a proposal, I know that in the European Parliament there are differing views on whether it's enough or not, whether it should be bigger or different. That's all up for debate. But the principle I think stands that if you create an energy transition, you have to make sure this is a just transition that you leave no one behind, and that we understand that certain groups in society will be more vulnerable than others. We need to address that vulnerability and make sure it doesn't happen.

We also made on the 14th of July, a range of measures to reduce greenhouse gas emissions from maritime transport. Of course, we want global action, but we believe that in the International Maritime Organization not enough was achieved over the last periods and we need to achieve more and do a lot better. I hope, and I see the momentum here at COP, I hope that the IMO and other international organizations also in aviation understand the time is now to change their attitude and to work towards putting a fair price on carbon to decarbonize their industry.

By taking responsibility for half of the emissions from extra-EU voyages, the EU would take responsibility for its fair share of shipping emissions. I would encourage third countries to decide an appropriate action to address their share of emissions. That's the other 50%. Or to support the development of appropriate global pricing schemes.

I believe putting a price on carbon and having a thorough discussion with the maritime sector. Some of the dirtiest stuff available on Earth is burnt by ships, to keep them going. Whereas there are alternatives, you can with renewables, you can. The first projects are very promising, that you can use for instance ammonia, green ammonia, to power shipping, these are the things we need to work for. And by putting a price on carbon you make the business case for alternative fuels more interesting.

So, one of the key priorities we have identified in our sustainable and smart mobility strategy, is to advance discussions on mid-and long term measures to ensure the swift implementation of the International Maritime Organisation's initial greenhouse gas strategy.

Now, on aviation I want to say a few things. We need a stronger contribution from the aviation sector to reach our climate targets. Aviation emissions in Europe increased an average of 5% year on year between 2013 and 2018. That's 5% every year. While there has been a recent reduction in air traffic, but that's completely COVID related and not because of different policies. Because now emissions are projected to grow again. So we have a serious challenge. That's why we propose to revise the ETS aviation rules to create an effective pricing to ensure that the sector contributes its fair share

Flights within the European Economic Area, as well as flights to Switzerland and the UK, will continue to be covered by the EU ETS. The total number of aviation allowances in the ETS will be capped at current levels, and be reduced annually by 4.2%. Well there's many other things we need to do, but I want to move quickly to CBAM because that was also something that Pascal announced.

Now if you put a price on carbon, and that's what everybody who is going to decarbonise is going to do, you run the risk of carbon leakage. It's as simple as one and one is two. So all nations moving in that direction will be faced with the potential of carbon leakage. This is something we need to prevent, and the only reason for CBAM is to prevent carbon leakage.

We want it to be in conformity with WTO rules. We want it to address this issue directly. We will use a trial period of two years where we see what the effect is in five sectors: cement, fertilizer, steel, aluminium and electricity. And we will see what happens globally. Now, if a Turkish minister recently said, one of the reasons why Turkey decided to sign and ratify the Paris Agreement is because we don't want CBAM to affect our trade with the EU, then CBM is already working even before it's been introduced. If I talk to partners who initially said we don't like CBAM, and I ask the question, but what about your carbon leakage risk? They all acknowledge your have it and they will need to find ways of addressing it.

My point is this, and I said it also when I travelled to India and Indonesia, if we all move in the direction of decarbonising our economy, of moving towards net zero, then we will all need to take comparable measures. Then the risk that CBAM will be applied in trade is lower, unless this risk can be manifestly demonstrated. And if we do that, then I think we can introduce a system that is in conformity with WTO rules.

I have to say the last couple of days and speaking to many, many countries here, that logic now is widely understood. It's not always liked but it's understood. I think it's undeniable that the issue of carbon leakage will have to be addressed for decarbonising efforts to actually be successful. So, this is what I had to say on CBAM.

I hope we can continue our dialogue, and I'm actually quite confident that we will increasingly create a space across the planet where countries take comparable measures to decarbonise our economy, which would make the introduction of CBAM not necessary, or only in a very limited way.

Thank you very much Pascal.