Model answers: Studies reveal EU must revamp Emissions Trading System to live within its carbon budget

The briefing asserts that the EU's current 55% emissions reduction target for 2030 is insufficient and that the proposed reforms to the EU ETS will fail to meet even their own targets. Based on research from Climact and the Öko Institute, the document advocates for a 65% overall reduction target by 2030 and an EU ETS target of at least 70%. To achieve this, it proposes a 'three-stage rocket' approach: a one-off reduction of 350 million allowances, increasing the Linear Reduction Factor to 4.4%, and revising Market Stability Reserve thresholds downward to zero by 2030.

• To align with a per-capita division of the remaining global carbon budget, the EU needs to reduce greenhouse gas emissions by at least 65% by 2030 (compared to 1990 levels) and achieve climate neutrality by 2040.
• The current EU ETS target of a 61% reduction by 2030 (compared to 2005) is inadequate; it should be raised to at least 70% to contribute its fair share to a 65% EU-wide reduction target.
• Modelling by Climact and the Öko Institute indicates that the European Commission's proposed EU ETS revisions will fail to reach the 61% target, partly due to overestimating the demand for allowances for risk management, such as energy sector hedging and industry banking.
• A delay in the new ETS Directive beyond 2024 could increase emissions from ETS sectors by 156 million tonnes due to the postponed start of the increased linear reduction factor.
• To make the EU ETS Paris compatible, the document recommends a one-off reduction ('rebasing') of at least 350 million tonnes and increasing the Linear Reduction Factor (LRF) to 4.4%.
• The Market Stability Reserve (MSR) thresholds must be revised downwards and ideally decline to zero by 2030 to prevent an oversupply of permits and ensure the 2030 target is met.

APA

Carbon Market Watch (2022). Model answers: Studies reveal EU must revamp Emissions Trading System to live within its carbon budget. https://carbonmarketwatch.org/wp-content/uploads/2022/05/Studies-reveal-EU-must-revamp-Emissions-Trading-System-to-live-within-its-carbon-budget.pdf

Chicago

Carbon Market Watch. Model answers: Studies reveal EU must revamp Emissions Trading System to live within its carbon budget. 2022. https://carbonmarketwatch.org/wp-content/uploads/2022/05/Studies-reveal-EU-must-revamp-Emissions-Trading-System-to-live-within-its-carbon-budget.pdf.

Wikipedia

{{cite report |author=Carbon Market Watch |title=Model answers: Studies reveal EU must revamp Emissions Trading System to live within its carbon budget |date=May 2022 |url=https://carbonmarketwatch.org/wp-content/uploads/2022/05/Studies-reveal-EU-must-revamp-Emissions-Trading-System-to-live-within-its-carbon-budget.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{carbonmarketwatch2022model, author = {{Carbon Market Watch}}, title = {{Model answers: Studies reveal EU must revamp Emissions Trading System to live within its carbon budget}}, institution = {Carbon Market Watch}, year = {2022}, month = may, url = {https://carbonmarketwatch.org/wp-content/uploads/2022/05/Studies-reveal-EU-must-revamp-Emissions-Trading-System-to-live-within-its-carbon-budget.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }