Federal Environment Minister Barbara Hendricks has welcomed the proposal by the EU Commission for a structural reform of the European emissions trading system ETS: "The proposal presents a sound basis for the negotiations. It is another important step towards revitalising ETS and establishing reliable framework conditions for long-term climate action."
With its proposal the Commission implements the climate targets agreed upon by EU heads of State and Government in October 2014. The EU wants to reduce its GHG emissions until 2030 by at least 40 percent compared to 1990. Emissions trading which is obligatory i.a. for the energy generation industry and large industrial enterprises is to play an important role in achieving this. The total volume of CO2 allowances is to be reduced by 2.2 percent annually as of 2020 up to 2030, in order to achieve the 40 percent target. The current reduction rate is 1.74 percent.
The upcoming ETS revision for the 4th trading period up to 2030 is the second step towards reform. In a first step, the member states and the parliament had agreed on the introduction of a market stability reserve. This instrument is to gradually reduce the present large allowance surpluses in the market. The overall aim is to enable ETS to give effective and reliable price signals in order to promote climate action.
Minister Hendricks underlined: "We now need speedy negotiations. Companies need early planning certainty to enable them to take the right investment decisions and ensure that we reach our climate targets in an efficient way." She continued: "There will be an extensive analysis of the details to be further discussed."
The proposal also includes provisions for companies facing international competition (carbon leakage issues). These companies will continue to be allocated free allowances in the future in order to avoid them being forced by ETS to relocate their production outside Europe. Thus the proposal presents a good balance between ambitious climate action and securing the competitiveness of European industry.