A large majority of European Union countries expressed reservations about, or even opposition to, the introduction of a new EU emissions trading system, adjacent to the current one, covering buildings and road transport (ETS2), at a meeting of Member States’ Environment Ministers (Environment Council of the EU) on Monday 20 December.
Ministers discussed the five proposals of the ‘Fit for 55 package’ managed by the Environment Council of the EU (see EUROPE 12848/14): - the revision of the EU ETS (including the creation of an ETS2); - the reform of the regulation (2018/842) giving each Member State a binding target for annual reductions in its greenhouse gas emissions (effort sharing regulation - ESR); - the setting of new CO2 emission performance standards for new cars and vans; - the creation of a Social Climate Fund; - the revision of the Land Use, Land Use Change and Forestry (LULUCF) Regulation (2018/841).
Of these, the creation of a second ETS for emissions from heating of buildings and road transport was perhaps the most criticized by the ministers.
The Czech Republic, Slovakia, Cyprus, Latvia, Romania, Hungary, Greece and Poland appeared to be the most opposed to this proposal. These countries are worried about the socio-economic consequences of such a mechanism for the most vulnerable households and for small and medium-sized enterprises.
Some of them, like Hungary, also say that the ETS2 would not significantly reduce emissions from buildings and road transport, given the low price elasticity of these sectors.
Germany, Denmark, Sweden and Finland, on the other hand, expressed rather favourable positions.
Spain, Lithuania, Belgium, Malta, Estonia, Luxembourg, Ireland and Portugal expressed reservations or concerns.
The Netherlands says it sees “potential benefits” in the creation of an ETS2. However, this should not replace ambitious CO2 performance standards for new cars and vans, the Dutch minister warned.
Following the debate, the European Commission’s Executive Vice-President for the Green Deal, Frans Timmermans, said: “I have taken good notes that there are diverging views in this Council on the new Emissions Trading System for buildings and road transport”.
Calling the proposal “an essential part” of the ‘Fit for 55’ package, he said that the Commission “is open to alternatives”, but that “these alternatives must allow us to reach the 2030 and 2050 (climate) targets”.
The Social Climate Fund divides
Ministers also appeared very divided on the creation of a Social Climate Fund, as proposed by the Commission, to compensate for the possible negative socio-economic effects of the ETS2.
The Netherlands, Austria, Sweden, Finland and Denmark have expressed their reservations or opposition to the proposal to finance this fund from the EU budget.
The Austrian minister called on the EU to consider an alternative financial mechanism.
For Estonia, the objectives could be achieved more effectively without the creation of a new, separate fund, but rather by using the revenues of the ETS2 via the same scheme as for the revenues of the current ETS.
The minister of Luxembourg appeared “not convinced” that this was the best option to ensure a just transition.
Malta and Cyprus have asked to review the allowances for them to better reflect their national specificities.
The Czech Republic, on the other hand, claimed that the fund was insufficient. The same goes for Greece, which says that the Social Climate Fund will not be able to “cover” all the social impacts of the ETS2.
Poland has advocated the creation of such a fund without making it conditional on the establishment of a second ETS.
It should also be noted that the Czech Republic, Romania, Hungary and Poland have criticised the provision in the proposed revision of the ETS to prohibit the financing of any fossil projects, including those related to natural gas, under the ‘Modernisation Fund’. (Original version in French by Damien Genicot)