On Monday 28 February, the French Presidency of the Council of the European Union transferred to the Member States a progress report on the discussions on five dossiers of the climate legislation package aimed at enabling the European Union to reduce its greenhouse gas (GHG) emissions by at least 55% by 2030 compared to 1990 levels (‘Fit for 55’ package).
One of these, and a central element of the package, is the revision of the EU Emissions Trading System (ETS) and the creation of a new ETS covering emissions from road transport and buildings (ETS2).
Regarding the review of the ETS, several issues of a political nature “will require further consideration”, says the Presidency’s text obtained by EUROPE.
These include parameters relating to the ETS ceiling and the market stability reserve (a mechanism to address the current surplus of emissions allowances in the EU carbon market), the potential creation of an intervention mechanism in case of excessive carbon price rises (this last point is not part of the European Commission’s initial proposal - see EUROPE 12762/1), the use of ETS revenues and the phasing out of free allowances in connection with the introduction of an EU ‘Carbon Border Adjustment Mechanism' (CBAM).
On the other hand, the inclusion of aviation and maritime emissions in the scope of the ETS is said to have received broad support from Member States.
These, the text states, are in line with the geographical scope proposed by the Commission for the extension of the ETS to the maritime sector.
With regard to the ETS applied to the aviation sector, the Presidency noted broad support from delegations for the proposal for a separate perimeter between the application of the ETS to flights within the European Economic Area (as well as to and from the United Kingdom and Switzerland) and the application of the international CORSIA scheme for international flights to and from third countries.
On the other hand, Member States are said to be divided on the trajectory for abolishing free allowances in aviation, the French document points out.
While several delegations claimed that the phasing out of free allowances should be accelerated compared to the Commission’s proposal (it foresees a phasing out of free allowances in aviation of 25% in 2024, 50% in 2025, 75% in 2026 and 100% as of 1 January 2027), others argued for a more gradual approach.
ETS2 continues to divide
Regarding the ETS2, Paris has “noted significant differences of opinion on the Commission’s proposal at this stage of the discussions and that the social, economic and financial issues involved have a strong political dimension”, the document states.
A majority of delegations reportedly expressed opposition or reservations at this stage, “mainly for reasons of public acceptability”. Many Member States fear that the creation of this new carbon market will lead to an additional burden on households, despite the compensation mechanisms planned by the Commission, such as the creation of a ‘Social Climate Fund’.
While most delegations “recognised the reality of the problem of growing emissions in the road transport and building sectors”, some delegations criticised “the very relevance of the mechanism to achieving the Fit for 55 targets”, the document states.
On the other hand, several delegations reportedly consider that the introduction of a new ETS for these two sectors, as a complement to the existing instruments, is essential in order to achieve the Union’ climate objectives while generating new revenues. Some delegations are said to have even supported the extension of the new ETS to all fossil fuels, as proposed by the European Parliament’s rapporteur on this dossier, Peter Liese (EPP, German) (see EUROPE 12867/3).
In addition to the issue of carbon markets, the Presidency’s document covers: - the revision of the effort sharing regulation (ESR - see EUROPE 12889/2); - the revision of the Land Use, Land Use Change and Forestry Regulation (LULUCF - see EUROPE 12889/2); - the modification of the CO2 emission standards for new cars and vans (see EUROPE 12869/11); - the creation of a Social Climate Fund (see EUROPE 12889/14).
See the French Presidency document (in French): https://aeur.eu/f/ls (Original version in French by Damien Genicot)