Greenhouse gas (GHG) emissions from installations covered by the European Union Emissions Trading Scheme (ETS) fell by 9.1% in 2019 compared to 2018, the equivalent of around 152 million tonnes of CO2, says a European Commission report on the functioning of the ETS published on Wednesday 18 November.
The document goes on to state that, as in previous years, the decrease is mainly due to the electricity and heat production sector, where emissions fell by a record 15% as a result of the increase in renewable sources of energy, increased use of natural gas and a reduction in coal consumption.
Although emissions from industry also recorded their strongest decrease so far in phase 3 of the ETS (2013-2020) (close to 2%), aviation emissions continued to grow, with a 1% increase compared to the previous year, i.e. around 0.7 million tonnes of CO2 equivalent.
The surplus of allowances continues to decrease
The Commission also stresses that the legislative changes agreed in recent years to address the surplus of emission allowances (caused by an imbalance between the supply of and demand for allowances) “continue to show positive results”.
Consequently, as the report notes, the surplus has decreased from 1.65 billion allowances in 2018 to 1.385 billion in 2019, showing that the Market Stability Reserve surplus indicator (which was published for the fourth time) continues to lead to surplus allowances being placed in the reserve.
On the basis of this indicator and the review of the functioning of the Market Stability Reserve introduced by Directive 2018/410, the supply of allowances auctioned in 2020 was reduced by nearly 375 million allowances (i.e. almost 35%), according to the Commission.
The total revenues generated by auctions exceeded €57 billion (a similar figure to the revenues generated the previous year), with total revenues to Member States of more than €14 billion in 2019 and €7.9 billion in the first half of 2020.
According to the Commission, “Member States spent or planned to spend close to 77% of 2019 revenues on advancing climate and energy objectives - well above the 50% required in the legislation”.
Start of phase 4 of the ETS
At the same time the report was published, the Commission announced it had finished preparations for phase 4 of the ETS, which will begin on 1 January 2021 and continue until 2030.
The Commission adopted a decision setting the number of allowances that will be issued Union-wide from 2021 onwards at 1,571,583,007 (the ceiling), having taken into account the decrease in the linear reduction factor and the end of the transitional period in the withdrawal agreement with the United Kingdom.
The linear reduction factor, which determines the number of allowances where the ceiling will decrease each year, will increase from 1.74% to 2.2% in 2021.
Unlike the transition between phase 2 (2008-2012) and phase 3 (2013-2020) of the ETS, the Commission also states that phase 3 allowances that are already on the market will not be replaced by phase 4 allowances, but will continue to exist alongside them.
The report can be found at: https://bit.ly/3nJ7PcS and the Commission decision at: https://bit.ly/3pMJIvG (Original version in French by Damien Genicot)