EU should extend emissions trading until at most 2045, keep current cap – German official
Politico
The European Union should extend issuing new allowances in its landmark emissions trading system for the energy and industry sectors (EU ETS 1) by several years, but stop short of raising the permitted total volume of greenhouse gas emissions, state secretary in Germany’s environment ministry Jochen Flasbarth told Politico.
“My idea would be for the [European] Commission to propose something between 2040 and 2045,” said the official. “I would predict that it will be a little closer to 2045.” The total volume of allowances should remain unchanged, but the system would be stretched out. The statements provide more detail on a proposal by environment minister Carsten Schneider, who had called for an extension last week.
The EU ETS, which puts a price on climate change-inducing CO2 emissions, has been a key driver of decarbonisation in energy and industry for 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. The EU is set to review the emissions trading scheme in 2026 and could decide a reform.
Extending the allowance auctions would align with Germany's economic and climate policy interests, Flasbarth told Politico, as the country approaches its climate neutrality goal in 2045.
In addition to extending the ETS 1 beyond 2039, several politicians and industry players have also called for changes to rules that grant free allowances to EU-based energy-intensive industries. Some sectors in international competition and at risk of ‘carbon leakage’ – the phenomenon where emission reductions in one country or region lead to increased emissions elsewhere when production relocates – receive free allowances. With the introduction of the EU carbon border tariff (CBAM – Carbon Border Adjustment Mechanism), which applies to emissions-intensive producers from outside the EU, free allowances are gradually phased out from 2026 until they reach zero by 2034.
Flasbarth called for changes to the CBAM to reduce bureaucracy and better protect Germany’s export-oriented economy. If this were not successful, free allocation of allowances would continue to be necessary “to a certain extent,” he told Politico.
