*** modified on Tuesday 8 February, 1 pm ***
While the proposed revision of the EU Emissions Trading System (ETS) envisages phasing out free emission allowances over a ten-year period from 2026, the ‘think tanks’ E3G, Jacques Delors Institute (Paris) et Europe Jacques Delors (Brussels) recommend accelerating this process in order to phase out all free allowances by 2030 at the latest.
In a joint note published on Monday 7 February, the two organisations point out that the industrial sectors benefiting from free allowances have received approximately 1.3 billion allowances in excess of their cumulative emissions since 2005.
They also note that free allowances currently cover 94% of industrial emissions, “muting the incentive to innovate and invest in cleaner production processes”.
In their view, it is therefore necessary not only to abolish free allowances altogether by 2030 (by replacing this system with the ‘Carbon Border Adjustment Mechanism’), but also to introduce conditionality measures such as the adoption of ‘transition plans’ by companies.
These measures would aim to ensure that, by 2030, the remaining free allowances only went to companies that innovated in favour of decarbonisation.
Regarding the 560 million free allowances that the EU will release in 2022, the two organisations advocate reinvesting them in a portfolio of innovative industrial projects that contribute to the fight against climate change, through the ‘Innovation Fund’.
See the note: https://aeur.eu/f/7q (Original version in French by Damien Genicot)