The Estonian Presidency of the EU's efforts have paid off. European Parliament and presidency negotiators, assisted by the European Commission, reached a provisional interinstitutional agreement in the small hours of Thursday 9 November on reform of the EU's carbon trading system, ETS, for 2021-2030 (see EUROPE 118097). Nine hours of all-out talks enabled agreement to be reached in time for COP23 (6-17 November).
Coming after two years of work, the agreement in principle was the successful outcome of the fifth trialogue meeting on the proposal to boost the effectiveness of the ETS, which is key to the EU's climate policy because it enables the EU to cut greenhouse gas emissions at a low cost. The deal will be presented to the EU member states’ permanent representatives on the COREPER committee on Friday 10 November. The final wording of a number of the agreement will needs to be worked out.
Basically, the final adjustments were made to the solidarity funds for modernisation and for innovation. The agreement will guarantee that the funds will be used to promote low-carbon technologies rather than supporting plans to generate electricity from fossil fuels. The compromise does, however foresee an exception for urban heating in the two poorest member states.
Other key elements include raising to 2.2% a year the annual emissions reduction trajectory, doubling the market stability reserve volume. eliminating excess quotas from the reserve on an annual basis from 2023 onwards (rather than 2024, which the Council would prefer) and protecting European industry from carbon leakage.
Agreement welcomed by the EU institutions. Announced in the midst of COP23, the agreement was immediately welcomed by the European Commission s a major step forward for the climate. “Today's landmark deal demonstrates that the European Union is turning its Paris commitment and ambition into concrete action. (...) This legislation will make the European carbon-emissions market fit for purpose,” said EU Climate Action and Energy Commissioner Miguel Arias Cañete. Similar satisfaction was expressed by MEPs, such as Ivo Belet (EPP, Belgium) and Esther de Lange (EPP, the Netherlands), who said the agreement was realistic and struck a balance between a constant reduction in CO2 emissions and protecting jobs and European competitiveness.
Disappointment vis-à-vis Paris Climate Agreement. There is lukewarm enthusiasm among the Greens/EFA group. “The ETS is improved; but won't be the flagship for EU climate policies. Additional national and European policies remain essential”, said Dutch MEP Bas Eickhout.
Environmental NGOs are disappointed, saying that due to too many free carbon credits for polluters, the aim of remedying failings will not be achieved, failings that have thus far prevented the ETS from playing a full role, and the compromise “falls short of meeting the Paris Climate Agreement’s goals.”.
Carbon Market Watch said: “Failure to align Europe’s carbon market with Paris goals adds pressure on governments to price pollution.”
Mixed reaction from industry. CEFIC says that a delicate balance has been struck “between a stronger EU ETS and a fair treatment of EU industries,” explains Marco Mensink, the organisation’s director general. Eurofer (the European Steel Association) says the provisional agreement is far from guaranteeing the European steel industry’s global competitiveness. (Original version in French by Aminata Niang)