Deal on more ambitious Emissions Trading System
The EU Emissions Trading System (ETS), which enshrines the “polluter pays” principle, is at the core of European climate policy and key to achieving the objective of EU climate-neutrality.
By putting a price on greenhouse gas (GHG) emissions, the ETS has triggered significant reductions in EU emissions, as industries have an incentive to reduce their emissions and invest in climate friendly technologies.
Emissions in the ETS sectors must be cut by 62% by 2030, compared to 2005, which is one percentage point more than proposed by the Commission.
In order to reach this reduction, there will be a one-off reduction to the EU-wide quantity of allowances of 90 Mt CO2 equivalents in 2024 and 27 Mt in 2026 in combination with an annual reduction of allowances by 4.3% from 2024-27 and 4.4% from 2028-30.
The free allowances to industries in the ETS will be phased out as follows: 2026: 2.5%, 2027: 5%, 2028: 10%, 2029: 22.5%, 2030: 48.5%, 2031: 61%, 2032: 73.5%, 2033: 86%, 2034: 100%.
The Carbon Border Adjustment Mechanism (CBAM), on which MEPs reached an agreement with EU governments earlier this week to prevent carbon leakage, will be phased in at the same speed that the free allowances in the ETS will be phased out. The CBAM will start in 2026 and be fully phased in by 2034.
By 2025, the Commission shall assess the risk of carbon leakage for goods produced in the EU intended for export to non-EU countries and, if needed, present a WTO-compliant legislative proposal to address this risk. In addition, an estimated 47.5 million allowances will be used to raise new and additional financing to address any risk of export-related carbon leakage.