On Monday 4 April, the French Presidency of the Council of the European Union transmitted to the Member States a first draft compromise on the revision of the EU climate Effort Sharing Regulation (ESR).
This regulation sets national targets for the reduction of greenhouse gas (GHG) emissions by 2030 that are not covered by the EU Emissions Trading System (ETS) or the Land Use, Land Use Change and Forestry (LULUCF) Regulation.
These emissions are mainly from road transport, heating of buildings, agriculture, small industrial installations, and waste management.
In order for EU countries to meet their target and thus contribute to the collective effort, annual emission allowances are set for each Member State and are gradually reduced until 2030.
Greater flexibility
While the draft compromise retains the national targets as well as the EU target (an EU-wide reduction of at least 40% below 2005 levels by 2030) proposed by the European Commission (see EUROPE 12762/2), it provides for more flexibility for Member States.
The French Presidency is proposing to increase the existing ceilings for annual transfers of emission allowances between Member States in order to promote “cooperation” and enable them “to achieve their targets cost-effectively”.
In addition, while the Commission’s proposal retains the current provision that a Member State may transfer up to 5% of its annual emission allowance for a given year to other Member States for the years 2021 to 2025 and up to 10% for the years 2026 to 2030, Paris suggests increasing these percentages to 10 and 20% respectively.
The Presidency also wants to extend the deadline for notifying the intention to use flexibility in the EU Emissions Trading System (ETS) to 31 October 2023, “in view of the increased level of ambition”.
This flexibility allows Member States whose national reduction targets were above the EU average and their cost-effective mitigation potential (Belgium, Denmark, Ireland, Luxembourg, the Netherlands, Austria, Finland and Sweden) and Malta to take into account the cancellation of a limited amount of emission allowances in the ETS for their compliance under the ESR.
Under the current regulation, the intention to use this flexibility had to be notified to the Commission by 31 December 2019. Of the above-mentioned countries, only the Netherlands and Sweden had not submitted a notification.
Paris also proposes to postpone the deadline for the notification of the decision of the States not to contribute or not to benefit from the additional reserve provided for by the Commission, as well as to ease the conditions for benefiting from it. This decision should therefore be notified to the Commission no later than twelve months - rather than six - after the entry into force of the revised regulation.
Under the current regulation, Member States have the possibility to set aside emission allowances in years when emissions are below their annual quota. They can then use them in subsequent years.
The Commission has proposed to create an additional reserve that could only be triggered once the target of reducing net greenhouse gas emissions by at least 55% by 2030 has been met by transferring ‘unused’ greenhouse gas removals generated in the EU (unused LULUCF credits) to those Member States that need them.
In addition to these additional flexibilities, the draft compromise provides for the Commission to report to the European Parliament and the EU Council - within six months of each global stocktaking exercise agreed under Article 14 of the Paris Agreement - on the functioning of the ESR, including the balance between supply and demand for annual emissions allowances, and its contribution to climate objectives.
In this report, the Commission should, inter alia, examine “the need for additional Union policies and measures in view of the necessary greenhouse gas emission reductions by the Union and its Member States, including a post-2030 framework” in order to make proposals where appropriate.
See the draft compromise: https://aeur.eu/f/15d (Original version in French by Damien Genicot)