German environment minister urges EU to extend industry emissions trading beyond 2039
Clean Energy Wire
Germany’s environment minister Carsten Schneider has called for issuing CO2 allowances in the EU’s emissions trading system (EU ETS 1) beyond 2039. "According to the current plan, the allocation of certificates will end in 2039; that is too soon," Schneider said.
"I would like us to resolve the issue of jobs and also the issue of allowances for the period after 2039," the Social Democrat (SPD) told parliament. "We do not have to be climate neutral by then – we want to be [climate neutral] by 2045," and the European Union by 2050. "We need the jobs in the [...] chemical industries in Germany and Europe," he added.
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. Low prices for CO2 allowances meant the ETS was long considered a toothless mechanism for climate action, but reforms have driven up the price, giving companies more incentives to reduce fossil fuel consumption. Under current rules, the emissions cap is set to reach zero by around 2039.
Schneider emphasised that any reform of the ETS had to be "compatible" with the proposal for a new EU climate target for 2040 — reducing emissions by 90 percent, compared to 1990.
The minister added that until the EU's carbon border adjustment mechanism (CBAM) is "functioning smoothly," export-oriented industry should continue to receive free allocations in the ETS. But Schneider did not say whether he would support a deviation from current rules.
The CBAM is a carbon tariff designed to level the playing field for European industry and prevent “carbon leakage” by applying a price to emissions embedded in imported goods, such as steel and cement. Until the introduction of the CBAM, the EU's main mechanism to prevent carbon leakage from industry has been the allocation of free CO2 emission allowances. CBAM will progressively become an alternative to the free allocation of allowances. The EU has decided to gradually phase out free allowances and end these for all industries by 2034.
Andreas Jung, deputy chairman of the conservative CDU/CSU parliamentary group, also called for changes to the EU ETS. However, he pointed out at an industry conference that many companies had already invested in climate protection technologies in expectation of rising emissions costs.
Alexandra Decker, the CEO of cement maker Cemex Germany, warned at the same event that extending free allowances “could be a showstopper for pioneers”.
German steelmaker Thyssenkrupp called for “urgent adjustments” to the ETS in August to prevent industry from falling behind global competitors. The company urged a slower and non-linear reduction of allowances in the system until 2050.
