A Fair EU ETS Revision REMOVING FAVOURITISM AND DISCRIMINATION FROM THE EU’S CARBON MARKET

The policy brief critiques the proposed EU ETS revision, arguing that over-generous free allowances to industrial sectors—particularly the steel industry—create windfall profits and deprive the public of potential auctioning revenues. It recommends increasing the Linear Reduction Factor to 4.2% to align with Paris Agreement goals, establishing a Just Transition Fund for workers, and shifting toward full auctioning to fund low-carbon innovation and support citizens.

• The current EU ETS emission reduction pace is insufficient to meet Paris Agreement goals; the 2.2% Linear Reduction Factor (LRF) would result in decarbonization of power and industry sectors only by 2058, whereas net zero emissions are needed by 2040. The document recommends increasing the LRF to 4.2% from 2021.
• The allocation of free allowances to industry prevents the mobilization of significant public funds. Depending on whether the Commission or European Parliament proposal is followed, taxpayers could lose between €160 billion and €175 billion in potential auctioning revenues for the 2021-2030 period.
• Industrial corporations in the steel, cement, refineries, and chemicals sectors are expected to generate €19 billion in windfall profits between 2021 and 2030 by passing through compliance costs to customers despite receiving free allowances.
• The steel industry is the primary beneficiary of free allowances, projected to receive 2 to 2.1 billion free allowances (approximately 30% of the total) worth between €49 billion and €53 billion for the 2021-2030 period.
• The European Parliament's proposal to grant 100% free allocation for electricity production from waste gases in the steel sector is criticized for causing market distortions and over-compensation, as steel producers already receive free allowances for 85% of waste gas emissions.
• There is a significant imbalance between subsidies for pollution and support for innovation; free allowances for industry (6.3 to 7 billion) are over ten times higher than the proposed Innovation Fund endowment (450 to 650 million allowances).
• To support workers in carbon-intensive sectors, the European Parliament proposed a Just Transition Fund that could raise €4 billion by pooling 2% of auctioning revenues, though this is only 20% of the expected corporate windfall profits.

APA

de Jong, F. (2017). A Fair EU ETS Revision REMOVING FAVOURITISM AND DISCRIMINATION FROM THE EU’S CARBON MARKET. Carbon Market Watch. https://carbonmarketwatch.org/wp-content/uploads/2017/06/A-Fair-EU-ETS-Revision_policy_brief_June2017_websingle_final.pdf

Chicago

de Jong, Femke. A Fair EU ETS Revision REMOVING FAVOURITISM AND DISCRIMINATION FROM THE EU’S CARBON MARKET. Carbon Market Watch, 2017. https://carbonmarketwatch.org/wp-content/uploads/2017/06/A-Fair-EU-ETS-Revision_policy_brief_June2017_websingle_final.pdf.

Wikipedia

{{cite report |last1=de Jong |first1=Femke |title=A Fair EU ETS Revision REMOVING FAVOURITISM AND DISCRIMINATION FROM THE EU’S CARBON MARKET |publisher=Carbon Market Watch |date=June 2017 |url=https://carbonmarketwatch.org/wp-content/uploads/2017/06/A-Fair-EU-ETS-Revision_policy_brief_June2017_websingle_final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{dejong2017fair, author = {de Jong, Femke}, title = {{A Fair EU ETS Revision REMOVING FAVOURITISM AND DISCRIMINATION FROM THE EU’S CARBON MARKET}}, institution = {Carbon Market Watch}, year = {2017}, month = jun, url = {https://carbonmarketwatch.org/wp-content/uploads/2017/06/A-Fair-EU-ETS-Revision_policy_brief_June2017_websingle_final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }