ETS Reform - What to look out for

On February 15 the European Parliament will vote on the reform of the EU’s pioneering Emissions Trading Scheme (ETS).

This is one of the main ways adopted by the EU to reduce greenhouse gas emissions, and its reform is essential to meeting the EU’s commitments to tackle climate change agreed at the UN Paris climate summit.

Up to now the scheme has not achieved a carbon price sufficient to trigger the technological and investment shifts required, largely due to the huge number of free carbon emission allowances given out. So reform is essential to move towards a low-carbon economy within decades.

The Commission’s draft reform package is enormous and highly technical. The Parliament is voting on some important MEP changes to strengthen the scheme. The proposed changes seek to better articulate climate ambition and necessary support for industries - and jobs -  competing in markets where carbon prices do not apply to all.   

Key amendments for improving the package include

  • Reducing the EU-wide cap on emissions by 2.4% yearly (instead of 2.2% proposed by the Commission) to bring the emissions level more in line with the Paris Commitments (amendment 40)
  • Establishing a ‘Just Transition Fund’ to help workers in regions relying on carbon intensive activities (and having a GDP per capita below the EU average). Trade unions have long called for a ‘Just Transition’ to ensure that a low-carbon economy is not achieved at the expense of the workforce. The EU setting up a ‘Just Transition Fund’ would send a strong message to those who fear being left behind and make a low-carbon economy a more attractive prospect for all (amendment 45).
  • Setting tougher environmental standards for projects funded by the ‘Modernisation Fund’ proposed by the European Commission to support investments in modernising energy systems and improving energy efficiency (in Member States with a GDP per capita below 60% of the Union average, amendment 104)
  • Creating an EU system to compensate industries that have to pay higher electricity prices because of emissions costs whereas, in the current system, compensation only exists in Member states where state aids are granted (amendment 44)

The EU needs to get a reformed ETS up and running, for the sake of workers and our climate” said ETUC Confederal Secretary Montserrat Mir. “The reform would be more effective if the Parliament voted through some improvements. It is not clear which way the votes will go, but I urge MEPs to seize the opportunity to push the ETS in the right direction. To fail to strengthen it would be disappointing.”