EU must safeguard emissions trading to ensure clean tech competitiveness – NGOs
Clean Energy Wire / Il Sole 24 Ore
A number of environmental NGOs and several EU member state governments have said that the EU Emissions Trading System (EU ETS) must be preserved as both a crucial climate policy instrument and a way to guarantee competitiveness of European clean tech businesses.
“We expect [German] chancellor [Friedrich] Merz to unequivocally defend emissions trading,” said Lutz Weischer, head of the Berlin office of NGO Germanwatch. “After all, a market-based policy instrument that sends a clear price signal is essential not only for achieving climate targets, but also to ensure that European companies are not left behind in the race for sustainable technologies.”
The ETS for industry, which has polluters pay for each emitted tonne of CO2, has been the cornerstone of climate action efforts in the European Union for two decades. However, calls for weakening it have recently grown louder, with Italy demanding a temporary suspension. The system, which also affects energy prices, is up for a mandatory review this year, and discussions about its future have become more heated.
EU heads of state and government will meet in Brussels on 19-20 March, with EU competitiveness, and the consequences of the military escalation around Iran on energy prices and energy security as key topics on the agenda. Leaders cannot take any decisions ahead of the regular legislative process, but could agree on policy guidance for a reform of the ETS.
Ahead of the meeting, a large group of European environmental organisations including WWF and the Climate Action Network Europe (CAN Europe) sent a joint letter to EU leaders, arguing that “weakening the EU ETS would increase regulatory risk and financing costs, delay final investment decisions and weaken Europe’s attractiveness for long-term industrial projects.” They called for a predictable carbon pricing framework “insulated from short-term political intervention.”
In a separate letter to European Council president António Costa, seen by Clean Energy Wire, EU leaders from Denmark, Finland, Portugal, Spain and Sweden said that “robust carbon pricing is indispensable for Europe’s industrial transformation.” They added that “attempts to weaken, suspend, or narrow the ETS would undermine investor confidence, penalise early movers, distort the level playing field, and slow the transformation of our economies.”
A key question in the debate is whether to extend the ETS by several years. Under current rules, the emissions cap is set to reach zero by around 2039, so no new allowances would be given out from that time, leaving only existing unused allowances in the market. "It is completely unrealistic to expect that there will be no emissions at all in the sectors concerned – such as steel, cement or aviation – from 2039 onwards," said Peter Liese, German conservative member of the European Parliament. Industry stakeholders have also said that full decarbonisation by that year is not possible.
European Commission president Ursula von der Leyen has said that the work on the ETS review would be accelerated, “in particular to define a more realistic decarbonisation trajectory beyond 2030,” reported Il Sole 24 Ore.
2026 is set to shape the future of the EU’s climate and energy policy architecture. Emissions trading is possibly the most crucial instrument, but the Commission has announced it would make reform proposals on a host of other regulations to detail the path towards the new 2040 climate target. These could include the renewable energy framework and the future of national climate targets currently governed by the effort sharing regulation.