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European Commission Proposes Slower Reductions in EU Carbon Market Allowances
The European Commission proposed changes to the EU Emissions Trading System that would reduce the annual cap decline from 4.3 percent to 3.7 percent starting in 2031 and to 1.7 percent from 2036. Free allowances for heavy industry would continue until 2038 instead of ending in 2034. The proposal also adds conditions on some allowances and expands the system to additional sectors.
Jul 19, 4:34 PM·1m read1 source
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The European Commission proposed revisions to the EU Emissions Trading System on Friday that would slow the annual reduction in emission allowances and extend free allocations to heavy industry. The cap on allowances would fall by 3.7 percent per year from 2031 and by 1.7 percent per year from 2036, compared with the current schedule of 4.3 percent rising to 4.4 percent.
Free allowances for heavy industry, previously set to end by 2034, would instead continue until 2038.
An analysis of the proposal found that the revised schedule would create roughly 2.4 billion additional allowances over the lifetime of the system compared with current law. The point at which the main cap reaches zero would shift from around 2040 to around 2050.
The European Commission's own impact assessment models 911 million tonnes of additional cumulative emissions by 2040 under the preferred options. The proposal includes a fallback provision that would raise the 2036 reduction rate to 2.7 percent if high-quality international credits do not materialize.
Sweden's prime minister Ulf Kristersson stated that the proposal is unfair to Swedish companies that have been at the forefront of the transition. Finland's prime minister Petteri Orpo joined Kristersson in a letter warning that the changes would penalize early movers.
Stegra, which is building a hydrogen-based steel plant in Boden, Sweden, said it has planned for a range of carbon prices and would remain profitable. SSAB told Dagens Nyheter it is analyzing the proposal. Negotiations with member states and the European Parliament are scheduled to begin Monday and are expected to last up to a year.
