The French Presidency of the Council of the European Union submitted to the Member States, on Wednesday 15 June, a draft political agreement (‘general approach) very close to the European Commission’s initial proposal for a new EU Emissions Trading System (ETS2 or ETS BRT).
Like the previous draft compromise detailed in our columns (see EUROPE 12969/9), the new French document, obtained by EUROPE, plans to postpone by one year the implementation of this second carbon market intended to cover emissions from heating of buildings and road transport.
Auctioning of ETS2 emission allowances would only start in 2027, as opposed to 2026 in the text presented by the Commission on 14 July 2021 (see EUROPE 12762/1).
Paris also wants to strengthen Article 30h to make measures against excessive price increases of emission allowances in the ETS2 more responsive (see EUROPE 12969/9).
In addition, the draft guidance emphasises that the creation of ETS2 is conditional on an agreement to establish a ‘Social Climate Fund’ (SCF) to address the social effects of ETS2.
However, the French Presidency retains the scope proposed by the Commission and the provisions related to the monitoring and reporting of emissions.
The same applies to the Linear Reduction Factor (LRF - the percentage by which the ceiling is reduced each year) which would be set at 5.15% before being increased to 5.43% in 2028.
The draft guidelines will be discussed by the Member States’ ambassadors to the EU (Coreper) on Friday 17 June, in a discussion that will also include the ‘Social Climate Fund’, given the direct link between the two files.
It should be noted that the French document complements the draft guidance on the other aspects of the ETS review submitted to Member States on 10 June (see EUROPE 12970/4). Given the controversial nature of the ETS2, the chapter on this new carbon market has indeed been treated separately from the rest of the ETS review.
The Presidency hopes to reach an agreement in the EU Council on the entire ETS review (including ETS2) on 28 June at the meeting of the EU Environment Ministers.
See the draft guidance on the entire ETS review: https://aeur.eu/f/25v (Original version in French by Damien Genicot)