Negotiations between the different political groups in the European Parliament on the revision of the European Union Emissions Trading System (ETS) are progressing slowly, raising fears that the original timetable will be delayed, said Michael Bloss (Germany), the Greens/EFA group’s shadow rapporteur on the issue, on Friday 22 April in an exchange with some media, including EUROPE.
“We have already had a lot of negotiations (five technical meetings and six meetings between the rapporteur and the shadow rapporteurs), but unfortunately we are not yet very close to compromises and common positions”, Bloss lamented.
With the Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI) scheduled to vote on the dossier on 16 May, the Green MEP anticipates a likely postponement of the vote.
According to him, the most difficult issues are: - the overall ambition of the review (i.e. the amount of emission allowances in the system); - the abolition of free emission allowances and the introduction of the Carbon Border Adjustment Mechanism (CBAM); - the potential creation of a second ETS covering emissions from heating of buildings and road transport (ETS2); - the use of the revenues generated by the ETS.
On the first point, the positions of the political groups differ not only on the possibility of a one-off reduction in the number of allowances in circulation (an idea mainly defended by the Greens/EFA and The Left), but also on the intensity of the increase in the linear reduction factor (percentage determining the quantity of allowances whose ceiling will be reduced each year).
While the European Commission and Parliament’s rapporteur on this dossier, Peter Liese (EPP, Germany), want to raise this factor to 4.2% (from the current 2.2%), the S&D group is defending 4.6% and the Greens/EFA 5.2% (see EUROPE 12893/18). Emma Wiesner (Sweden), shadow rapporteur for the Renew Europe group, proposes to keep the 4.2% rate, but to increase it by 0.1 percentage points each year compared to the previous year.
A compromise proposal was reportedly made for a rate of 5.09%.
Free quotas
With regard to the abolition of free emission allowances and the introduction of the CBAM, the initial text presented by the Commission provides for the reduction of these allowances for the sectors covered by the CBAM by 10% per year from 2026 (the year from which the CBAM would be operational), leading to a total abolition in 2036.
While Mr Liese proposes to keep this approach (see EUROPE 12867/3), Ms Wiesner and Jytte Guteland (Sweden), the S&D group’s shadow rapporteur, argue for a faster pace.
The first suggests maintaining 90% of free allowances for these sectors in 2025, 80% in 2026, 70% in 2027, 50% in 2028, 25% in 2029 and 0% in 2030 (see EUROPE 12895/11). For the latter, this share should be 90% in 2025, 70% in 2026, 40% in 2027 and 0% in 2028.
The Greens/EFA and The Left, on the other hand, want the CBAM to start operating immediately (as soon as the legislation establishing the mechanism enters into force) and to phase out free allowances simultaneously, rather than waiting until 2025 or 2026.
According to our information, a compromise proposal foresees to maintain 100% of free allowances for the sectors covered by the CBAM until 2027 and then to proceed with reductions, first by 10% until 2030 and then by 17.5%, in order to completely eliminate these free allowances by 2034.
In its draft opinion on the review of the ETS adopted on 20 April, the Parliament’s Committee on Industry, Research and Energy (ITRE) recommended the same pace, but starting in 2028, to achieve a complete phase-out of free allowances for the CBAM sectors by the end of 2034.
ETS2
On the creation of ETS2, Mr Liese was expected to deliver a first compromise suggestion on Friday to feed into the discussions between negotiators at their next meeting on Monday 25 April. (Original version in French by Damien Genicot)