In her amendments to the draft report by Peter Liese (EPP, Germany) obtained by EUROPE on Friday 18 February, MEP Emma Wiesner (Sweden), the Renew Europe group’s shadow rapporteur for the review of the EU Emissions Trading System (ETS), proposes to accelerate the phasing out of free allowances with a view to achieving their total elimination by 2035.
According to her proposal, the share of auctioned allowances should be 60% from the year following the entry into force of the ETS review and would then be increased as follows: 70% from 2028, 80% from 2030, 100% from 2035.
For the sectors that will be progressively covered by the future EU Carbon Border Adjustment Mechanism (CBAM), Ms Wiesner estimates that this share should be 90% in 2025, 80% in 2026, 70% in 2027, 50% in 2028, 25% in 2029 and 0% in 2030. This is a faster pace than that advocated by the European Commission and Mr Liese (see EUROPE 12762/1), but slower than that proposed by the S&D Group (see EUROPE 12893/18).
Wiesner also suggests an approach to better target the free allocation of allowances through a “carbon leakage indicator” corresponding to the sector’s trade intensity with third countries (the ratio of the total value of exports to third countries plus the value of imports from third countries to the total size of the European Economic Area market) multiplied by its emission intensity (measured in kgCO2) and divided by its gross value added (in euros).
Sectors and sub-sectors with an indicator below 0.2 would thus be considered to have a negligible risk of carbon leakage and would not be eligible for free allowances.
Those with an indicator above 2, on the other hand, would keep 100% of their free allowances for the period up to 2030.
This share would fall to 60% for sectors and sub-sectors with an indicator between 0.2 and 2.
Free allowances would also be conditional on the adoption by economic operators of “industrial decarbonisation plans” by January 2025.
If a company fails to meet the targets and milestones set out in the plan, its free allowances will be reduced by 25% or more depending on its emissions.
Ms Wiesner proposes that installations in the least efficient 10% (in terms of emissions) in a sector or sub-sector in the EU should no longer receive a free allowance.
Free allowances would be reduced by 50% for installations that are more efficient than the 10% least efficient installations, but less efficient than the 60% most efficient installations.
See the amendments by Ms Wiesner: https://aeur.eu/f/f5 (Original version in French by Damien Genicot)