Negotiations on the revision of the ETS scheme have slowed down before the final round

Negotiations on reforming the EU’s Emissions Trading System (ETS) have slowed ahead of the final round scheduled for December 16. Euractiv reports about it.

The ETS, which requires the purchase of carbon certificates from large sources such as steel mills and coal-fired power plants, is the EU’s flagship climate policy instrument. But negotiations to reform the scheme have proved more difficult than expected, potentially jeopardizing its planned completion in December.

“We are dealing with the biggest environmental and climate law that has ever been in the EU institutions,” explained Peter Lise, MEP who is the main negotiator.

As the publication notes, in order to achieve the EU’s goal of reducing carbon emissions by 55% by 2030, the number of certificates available on an annual basis must be significantly reduced. At the same time, the ETS system should be expanded to include the restricted sectors – maritime transport, motor vehicles and building emissions. This should be included in the current edition. The negotiators have not yet reached an agreement on some of these aspects.

While technical issues, such as the benchmark for calculating the number of free emissions for steel producers, have been resolved, more than half of the political ones remain open. Among the most complex are the extension of the ETS to buildings and transport, the so-called ETS2, as well as the sources of funding and the size of the new Social Climate Fund (SCF) to be introduced.

Another key point for EU member states is the plan to phase out the free allocation of CO₂ emissions quotas to the steel industry and aluminum producers. To keep Europe competitive and prevent factories from moving abroad, these industries now receive the bulk of their emissions allowances for free. The idea is to gradually replace this mechanism with a carbon tax and ensure that importers pay the same price as European industry.

As GMK Center reported earlier, the European Steel Association (EUROFER) and the European Aluminum trade association have joined other sectors in calling for a phased-in carbon tax on imports. A cautious approach to the gradual abandonment of the free distribution of carbon emission quotas is needed, as the new mechanism (CBAM, carbon border adjustment mechanism) still needs to be tested.

Also, in October, European steel producers achieved continuation of free CO₂ emission permits under the Emissions Trading System (ETS) after 2030.