Brussels (Brussels Morning) The European Commission (EC) is to propose radical changes to the EU Emissions Trading System (EU ETS) in July, making it the largest reform of the system since it was launched in 2005.
The draft ETS proposal includes a one-off reduction of the number of CO2 permits as well as a speeded-up reduction in the number of permits that enter the market each year, Reuters reports.
The EC will propose a policy package in mid-July that is intended to cut greenhouse gas emissions at least 55% by 2030 compared to 1990 levels. According to current ETS rules, airlines, power plants and factories must buy CO2 permits when they pollute.
The Commission wants to add shipping to the ETS list, including inbound and outbound maritime voyages, in addition to creating a separate ETS for heating systems in buildings and transport.
Revenues from the new ETS are to go towards a fund that will support vulnerable households should the new rules cause their fuel bills to increase.
Industries are expected to resist the EC proposal to abolish free carbon permits. Another proposal is to introduce a border tariff on products like cement and steel because their production entails significant greenhouse gas emissions.
New tariff to offset new measure
The tariff would be linked to the EU carbon price to help put EU companies on equal footing with their foreign counterparts.
While the draft does not specify how quickly the number of carbon permits will be cut, it does point out that such a move would help prevent the accumulation of excess permits on the market, which could lower carbon prices.
The price of carbon permits in the EU reached record levels this year. They currently stand at approximately 56 euro per tonne of CO2.
The EC could yet change its proposal before next month’s presentation. After that, EU member states and the European Parliament will proceed to negotiations about the reforms, a process that could take up to two years.
