Carbon Market Watch response to Inception Impact Assessment on the EU ETS

Carbon Market Watch proposes a comprehensive strengthening of the EU ETS, including increasing the Linear Reduction Factor to reach zero emissions by 2040 and increasing the Market Stability Reserve intake rate to 36% from 2024. The organization advocates for the full auctioning of emission allowances, earmarking 100% of revenues for climate action, and extending the system to include international maritime transport and waste incineration. Conversely, it argues against including road transport and buildings in the ETS and opposes the inclusion of Carbon Dioxide Removal (CDR) credits.

• To align with the Paris Agreement, the EU ETS should target a 65% emissions reduction by 2030 and achieve climate neutrality by 2040, which requires increasing the Linear Reduction Factor (LRF) and implementing a one-off cap reduction by 2023.
• The Market Stability Reserve (MSR) requires strengthening to address current and future surpluses, specifically by increasing the intake rate to 36% starting in 2024, adopting declining thresholds, and implementing automatic cancellation for allowances held for over five years.
• The document calls for the full auctioning of emission allowances across all sectors, noting that 94% of industrial emissions and approximately half of aviation emissions are currently covered by free allowances, which may slow decarbonisation.
• The European Commission should mandate that 100% of ETS auctioning revenues be earmarked for climate action, including industrial innovation, modernisation, just transition, and international climate finance, replacing the current non-binding 50% provision.
• The EU ETS should be expanded to include international maritime transport and municipal waste (MSW) incinerators, but it should not be extended to road transport and buildings due to potential negative social impacts and limited emissions impact.
• If a Carbon Border Adjustment Mechanism (CBAM) is introduced, the EU ETS should be extended to cover importers' emissions while simultaneously phasing out other carbon leakage measures, such as free allowances, to avoid double protection.
• Carbon Dioxide Removal (CDR) credits and Carbon Capture and Utilization (CCU) should be excluded from the EU ETS because the related monitoring, reporting, and verification (MRV) systems are not yet mature and CCU does not provide permanent storage.

APA

Carbon Market Watch (n.d.). Carbon Market Watch response to Inception Impact Assessment on the EU ETS. https://carbonmarketwatch.org/wp-content/uploads/2020/12/Response-to-Inception-Impact-Assessment-on-EU-ETS.pdf

Chicago

Carbon Market Watch. Carbon Market Watch response to Inception Impact Assessment on the EU ETS. n.d. https://carbonmarketwatch.org/wp-content/uploads/2020/12/Response-to-Inception-Impact-Assessment-on-EU-ETS.pdf.

Wikipedia

{{cite press release |author=Carbon Market Watch |title=Carbon Market Watch response to Inception Impact Assessment on the EU ETS |url=https://carbonmarketwatch.org/wp-content/uploads/2020/12/Response-to-Inception-Impact-Assessment-on-EU-ETS.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{carbonmarketwatchndcarbon, author = {{Carbon Market Watch}}, title = {{Carbon Market Watch response to Inception Impact Assessment on the EU ETS}}, publisher = {Carbon Market Watch}, url = {https://carbonmarketwatch.org/wp-content/uploads/2020/12/Response-to-Inception-Impact-Assessment-on-EU-ETS.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }