The Emissions Trading System (EU ETS or ETS) must be preserved, according to several players in the European industry, but it must do more to encourage investment in decarbonisation, they said during a public hearing organised by the European Parliament’s Committee on the Environment on Tuesday 2 June.
Following calls by several Member States (Greece, Czech Republic, Poland, Romania, France, Germany, Spain, Estonia) for a loosening of the EU ETS rules at the ‘Competitiveness’ Council on 28 May (see EUROPE 13877/10, 13874/16) and ahead of the revision of the system, scheduled by the Commission for 15 July, MEPs heard from industry stakeholders, NGO representatives and research institutes.
The invited speakers came from different countries and represented different industrial branches or civil society and research.
More predictability, better use of ETS revenues. Among the invited speakers, with the exception of Daniel Tamchyna, CEO of a Czech chemicals company and representative of the Czech Chemical Industry Association, who advocated individual carbon taxation rather than allowances, all the other speakers stressed the overriding importance of the ETS for reducing industrial emissions and supporting decarbonisation. “We need regulatory stability, notably by aligning the CBAM with the ETS,” said Eleanor Batilliet of the German construction company Heidelberg. “ETS revenues must make it possible to invest in decarbonisation”.
“It is essential for the ETS to be better articulated with European decarbonisation and electrification policies”, continued Mathilde Painchart of the French public company EDF (electricity). In her view, this means electrifying other industrial sectors to help decarbonise them, and ETS revenues should support this.
Lidia Tamellini, from the NGO Carbon Market Watch, stressed that “82% of fixed ETS emissions still came from fossil fuels in 2024” and that the European Court of Auditors had pointed out that “€200 billion was lost through free allowances”, which amounts to a significant loss of ETS revenues.
“We are not yet in a situation where the price of decarbonisation weighs heavily on any given industrial sector”, she argued, reacting to certain criticisms from industry and from some political groups in the European Parliament.
A European carbon bank. Robert Jeszke, of the Polish research institute KOBiZE, said that “the problem of price predictability has not been resolved”. He stressed in particular that the sectors that are most difficult to decarbonise must be able to benefit from “flexibility” in the gradual phasing-out of the allocation of free allowances. He also put forward the idea of a European carbon bank or a European carbon management agency. In his view, this could be “a one-stop shop for international allowances, for verifying removals, for creating buffers and managing risks”.
The issue of penalising the ‘first movers’ was also raised, both by Robert Jeszke and by Stefan Savonen of the Swedish iron ore company LKAB. “The ETS is the instrument that makes it possible to attract investment in decarbonisation, but without a clear political message, no company will take the risk of investing in new technologies for decarbonisation”, he said. In his view, the first movers must be encouraged temporarily, for example through a bonus system, which would make it possible to reduce the investment risks linked to new technologies, alongside the reduction in the allocation of free allowances. “Industry must know that the rules of the game are not going to change overnight”, he concluded. (Original version in French by Nadège Delépine)