The French Presidency of the Council of the European Union delivered a proposed political agreement (‘general approach’) to Member States on Friday 10 June on the revision of the EU Emissions Trading System (ETS), leaving aside the chapter on the creation of a second ETS covering emissions from the heating of buildings and road transport (ETS2).
The proposed general approach retains the main parameters of the ETS as set out in the revision proposal, such as the increase in the linear reduction factor (LRF) and the one-off removal of a number of emission allowances (see EUROPE 12762/1).
It also maintains the European Commission’s ten-year timeframe for phasing out free allowances for sectors covered by the EU’s future ‘Carbon Border Adjustment Mechanism’ (CBAM).
However, the text also contains significant changes.
In particular, the French Presidency proposes that existing beneficiaries of the ‘Modernisation Fund’ should continue to benefit from the fund for natural gas projects in respect of existing allowances.
It also introduces new features regarding the governance and transparency of the fund and the Innovation Fund. In the context of the Innovation Fund, Paris suggests that special attention be given to the maritime sector with the possibility of launching dedicated calls for projects for the sector (see EUROPE 12939/2).
The draft text also provides for the possibility of including the municipal waste incineration sector in the ETS. However, this possibility is linked to the prior publication of a Commission report, by 31 December 2026 at the latest, assessing the impact and feasibility of such an inclusion.
Paris also amends the provisions of Article 29a on measures to be taken in the event of excessive fluctuations in the price of emission allowances to make them more responsive and effective. However, this part still seems to divide the Member States, as the Presidency proposes to come back to it at a later stage.
Maritime sector
Concerning the gradual extension of the ETS to emissions from ships with a gross tonnage of more than 5,000, the draft approach maintains the geographical scope proposed by the European Commission.
However, it postpones this extension to 2025, one year later than the Commission (see EUROPE 12969/9), and introduces new provisions to combat the risk of evasion in transhipment ports close to the EU (see EUROPE 12960/10).
Paris also wants to include methane and nitrous oxide emissions from 2024 in the regulation (2015/757) on the monitoring, reporting and verification of CO2 emissions from the maritime transport sector with a view to their subsequent inclusion in the ETS.
The extension of the ETS to these emissions is, however, linked to a review clause. According to this, the Commission would be required to present a report by 31 December 2026 examining the feasibility and cost-effectiveness of including non-CO2 greenhouse gas emissions from maritime transport in the ETS.
The Commission would also be obliged to assess the appropriateness of extending the ETS to ships with a gross tonnage of between 400 and 5,000 tonnes by 31 December 2025 (see EUROPE 12965/17).
The draft general approach also contains a new provision on the transfer of ETS-related costs from the shipping company to the commercial operator while the shipping company remains the responsible entity under the ETS in order to ensure compliance with the ‘polluter pays’ principle (see EUROPE 12969/9).
Aviation sector
It should be noted that the French document is accompanied by two other draft general approaches related to the revision of the ETS: one on the aviation component of the ETS, the other on the market stability reserve (MSR).
The first maintains the provisions foreseen by the European Commission regarding the phasing out of free allowances for aviation (auctioning of 25% of these allowances in 2024, 50% in 2025, 75% in 2026 and 100% in 2027) as well as the arrangements for how the ETS will link to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA - see EUROPE 12764/10).
With regard to the MSR, Paris does not introduce any significant changes to the Commission’s original proposal (see EUROPE 12768/2).
The three Presidency documents will be discussed by the Member States’ ambassadors to the EU (Coreper) on Wednesday 15 June (provisional date) in preparation for the meeting of the Member States’ Environment Ministers scheduled for 28 June. The ambassadors will discuss the issue of ETS2 two days later, on Friday 17 June.
See the proposed general approach
On the ETS: https://aeur.eu/f/235
On the aviation component of the ETS: https://aeur.eu/f/22z
On the MSR: https://aeur.eu/f/230 (Original version in French by Damien Genicot)