Key facts
- The EU has proposed reforms to its Emissions Trading System (ETS) that critics say could hinder carbon emission cuts.
- The proposed changes include extending free carbon permits for industries until 2038, delaying a planned carbon border charge.
- Climate experts have described the reform as a 'Trojan horse' that benefits polluters and delays decarbonization efforts.
- A new carbon price will be applied to flights departing the EU starting in 2029, but only for routes within 5,000km.
- The ETS has generated over €270 billion in revenue since 2005, funding innovation and industrial decarbonization.
The European Union has introduced controversial reforms to its Emissions Trading System (ETS), a key climate policy designed to reduce greenhouse gas emissions. The proposed changes, unveiled on July 17, aim to ease pressure on EU industries facing geopolitical and economic challenges. However, these reforms have drawn significant criticism from climate experts who argue they weaken the system and could impede progress towards climate targets.
The ETS requires industries and power plants to purchase permits for each tonne of carbon dioxide emitted, incentivizing a shift to cleaner technologies. The system limits the number of available permits annually to ensure emissions reductions. Under the new proposals, the bloc suggests extending the provision of free permits to companies until 2038, a move that pushes back the original plan to phase them out in 2034 and replace them with a carbon border adjustment mechanism.
Additionally, companies with approved decarbonization plans would receive 80% of free permits upfront, with the remaining 20% contingent on actual investment. Wopke Hoekstra, Commissioner for Climate, Net Zero and Clean Growth, stated that the proposal balances climate action, competitiveness, and independence, emphasizing the ETS's success in cutting emissions and mobilizing investment.
Despite these justifications, climate experts have voiced strong opposition. Linda Kalcker, executive director at Strategic Perspectives, called the reform a 'Trojan horse,' suggesting it allows companies to delay emission reductions rather than accelerate them, potentially putting them at a disadvantage compared to international competitors. Chiara Martinelli, director of Climate Action Network (CAN) Europe, argued that weakening the ETS now benefits polluters who prioritize shareholder payouts over investing in cleaner production. The NGO Mission Possible Partnership (MPP) also criticized the conditionality of the free permits, stating it should be more closely tied to actual investments.
A significant change includes the introduction of a carbon price on flights departing the EU, set to begin in 2029. However, this measure will only apply to flights within a 5,000km radius, exempting longer journeys and an estimated 47% of European aviation emissions. Transport & Environment (T&E) described this as a 'half-hearted step,' urging member states to expand coverage in the future. T&E did welcome the allocation of 110 million ETS allowances to support clean shipping fuels and propulsion technologies.