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The EU ETS is currently failing to promote low-carbon solutions due to a carbon price that has plunged to around 5 euros per tonne of CO2, driven by a surplus of 2.1 billion tonnes of CO2-equivalent allowances. This oversupply is attributed to weak emission targets, the inflow of international offsets, and reduced demand following the economic crisis. The document warns that this surplus allows the EU to transform current emission reductions from other policies into 'future rights to pollute', potentially reducing the domestic impact of the 2030 climate target from 40% to 34%. To fix the market, the author recommends increasing the linear reduction factor to 2.6%, permanently cancelling 1.6 billion excess allowances, enacting the Market Stability Reserve by 2017, and transitioning to full auctioning for all industrial sectors post-2020 to eliminate windfall profits and adhere to the polluter-pays principle.

EU coal emissions rose 6% from 2010 to 2013, contributing to 18% of total EU CO2 emissions. This increase was driven by fuel-switching from gas to coal in Germany, the UK, and Poland, which together account for 66% of coal-based emissions. While renewables and falling demand reduced overall fossil generation by 4.3% per year, the low carbon price under the EU Emissions Trading System (ETS) failed to prevent coal's resurgence. The report warns that the Industrial Emissions Directive (IED) may not force expected closures because of cheaper compliance technologies and the introduction of capacity markets, particularly in the UK and Poland, which risk locking in high-carbon infrastructure into the 2030s. Modelling suggests that if coal remains cheaper than gas, emissions will fall only 3% by 2016, though the potential for fuel-switching will increase by 2020. Sandbag recommends urgent ETS reform, mandatory carbon intensity reporting, and targeted CCS funding.

The analysis reveals a sharp ideological divide between left-wing parties (PES, EGP, EL) and right-wing parties (EPP, ALDE) concerning the causes of the financial crisis and the role of public investment. While there is broad consensus on the need for a transition to renewable energy, the European Green Party (EGP) is the only party providing specific quantitative targets for carbon emissions and energy efficiency. Democratic reform is prioritized by smaller parties (ALDE, EGP, EL), whereas the larger PES and EPP parties largely ignore treaty reform in their platforms.

The Effort Sharing Decision (ESD) covers approximately 60% of EU greenhouse gas emissions, focusing on sectors like transport, buildings, and agriculture. The document argues that the 2013-2020 targets were too weak, leading to a projected surplus of 600 million tons of CO2-eq by 2020. It recommends that the 2030 framework significantly increase targets to at least 45% below 2005 levels, exclude international offsets, and maintain a separate pillar for land use, land-use change and forestry (LULUCF) to avoid undermining overall climate ambition.

The report analyzes the implementation of the Effort Sharing Decision (ESD), which targets non-ETS sectors responsible for nearly 60% of EU emissions. While 15 Member States are projected to over-achieve their 2020 targets, others face significant gaps, particularly in road transport and buildings. The document highlights that while the overall EU 2020 target is likely to be met, several countries rely on flexibility mechanisms or planned additional measures rather than existing policies to close their emission gaps.

The document details the Effort Sharing Decision (ESD), which manages greenhouse gas reduction targets for EU Member States in sectors not covered by the EU Emissions Trading System (EU ETS). It explains how targets are set based on GDP per capita, the role of Annual Emission Allocation units (AEAus), and the specific reporting and compliance cycles managed by the European Commission. The report also outlines seven flexibility options—including banking, borrowing, and the use of Kyoto units—and discusses how the ESD interacts with other EU directives on renewable energy and energy efficiency, as well as the Kyoto Protocol.

The report assesses the 2009-2014 European Parliament term from a Green perspective, highlighting victories in energy efficiency, data protection, and fisheries, while critiquing the influence of fossil fuel and agro-industrial lobbies. It argues for a more democratic, social, and ecologically sustainable European Union to counter neoliberal austerity and conservative pushback.

Carbon Market Watch recommends that the European Council increase the EU's 2030 greenhouse gas reduction target to at least 55% and permanently remove the surplus of over 2.5 billion emissions allowances in the EU ETS. The organization warns that carrying over this surplus could weaken the 40% target to a de facto 33% reduction. It further argues against the use of international offsets due to poor environmental quality and cautions that including land-use, land-use change and forestry (LULUCF) sectors as net sinks would undermine the effectiveness of the GHG target.

The document analyzes the political conflict surrounding the EU's attempt to regulate international aviation emissions via the EU-ETS, arguing that resistance from other nations is driven by political realism rather than policy design. It concludes that a global market-based mechanism through ICAO is unlikely in the near term and warns that retreating from its sovereign right to regulate its own airspace could undermine the EU's credibility and vulnerability in other extraterritorial regulatory areas.

The report finds that while the EU ETS initially focused management attention on CO2, a declining carbon price and free allocation rules have since diminished its impact. Most emission reductions were driven by economic cycles or non-ETS regulations. The authors argue that current free allocation creates distortions, such as discouraging asset rationalization and incentivizing excess clinker production. To unlock deep mitigation like Carbon Capture and Storage (CCS) and clinker substitution, the report recommends strengthening the carbon price signal, reforming leakage protection through output-based allocation or the inclusion of consumption, and providing targeted innovation support.

The document examines Europe's position within a global 'leading group' of countries advancing energy efficiency, renewable energy, and carbon pricing. It argues that staying in this group is essential for Europe to attract investment, drive innovation, and reduce dependence on energy imports. The authors contend that energy prices are not the primary driver of global competitiveness for most industries, as 92% of German manufacturing spends less than 1.6% of revenue on energy. For the small minority of energy-intensive sectors, the report asserts that price differentials are primarily caused by natural resource endowments rather than climate policies, and that existing 'Carbon Leakage' protections in the EU ETS mitigate competitive risks. The report concludes that a coordinated European low-carbon strategy can create net-employment gains and maintain international credibility in climate negotiations.

The research paper examines the complexity and stringency of the Clean Development Mechanism's (CDM) monitoring, reporting, and verification (MRV) requirements. It finds that these rules act as barriers to project success, noting that only one-third of registered projects have successfully managed initial verification to receive carbon credits. By comparing CDM-MRV provisions with those of the EU Emission Trading System (EU ETS), the paper concludes that some CDM requirements are stricter and less flexible than necessary, creating burdens that do not contribute to environmental integrity. The document suggests that improving cost-efficiency and reducing uncertainty in these rules is essential for the development of future market-based mechanisms.

A coalition of environmental organisations calls on the European Commission to exclude international offset credits from the 2030 climate and energy framework to prioritise domestic abatement. The letter argues that offsets previously contributed to a surplus of over two billion allowances in the EU ETS and undermined climate goals, suggesting that a 2030 target of 55% carbon emission cuts, 45% renewable energy share, and 40% energy savings is necessary.

Carbon Market Watch advocates for a domestic greenhouse gas reduction target of at least 55% by 2030 for Europe. The briefing argues that international offsetting is a 'major policy failure' that undermines domestic abatement and calls for the expiration of the estimated 2 billion surplus allowances and offsets accumulated up to 2020. It further recommends increasing the 'linear reduction factor' for permits in the EU ETS and implementing strict safeguards for any future linking with external carbon markets to prevent the import of substandard credits.

Carbon Market Watch warns that a leaked draft of the 2030 Council Conclusions contains 'technical loopholes' that could reduce the effective EU greenhouse gas emission reduction target from 40% to as low as 26%. The organization specifically criticizes the potential banking of 'phantom pollution rights' (surplus allowances), the use of afforestation offsets for agriculture, the dynamic allocation of free permits to industry, and the possible inclusion of transport fuels in the EU ETS.

Carbon Market Watch argues that international carbon offsets have failed to deliver promised climate benefits and have undermined the EU's domestic abatement efforts. The brief recommends a legally binding EU domestic GHG reduction target of at least 55% below 1990 levels for 2030, the total elimination of international offsets for meeting mitigation obligations post-2020, and the implementation of safeguards when linking the EU ETS to other trading schemes. It further suggests that climate finance should shift away from carbon markets toward regulation, standards, and incentive programs, such as performance-based financing for Nationally Appropriate Mitigation Actions (NAMAs).

The document advocates for a genuinely economy-wide approach to the EU's 2030 GHG targets, emphasizing that the Effort Sharing Decision (ESD) must be reformed to incentivize domestic action in non-ETS sectors like transport, agriculture, and buildings rather than relying on international offsets. It argues that higher ambition in these sectors is essential to meet 2050 goals and will unlock co-benefits such as improved public health, job creation, and technological leadership. The authors call for a stronger governance framework, including Commission approval of detailed national plans, to improve investor certainty and policy coherence.

The document examines how international carbon offsets under the Clean Development Mechanism (CDM) and Joint Implementation (JI) have contributed to an oversupply of allowances in the EU Emissions Trading System (EU-ETS) and the Effort Sharing Decision (ESD). It highlights critical failures in 'additionality', noting that many projects would have occurred without offset funding, and points to a lack of sustainability and human rights protections. The author recommends a ban on industrial gas projects, large-scale power projects, and JI track 1 projects for the 2013-2020 period.

The report argues that current international climate targets often rely on incoherent 'effort-sharing' models rather than ethical budget-sharing. It proposes a framework where the global greenhouse gas budget to 2050 is back-calculated from 1990 and divided among nations based on their 1990 share of the global population. Under this model, the EU would have a budget of 204 billion tonnes, of which 57% was used by 2012. The author advocates for international emissions trading of fossil and industrial CO2 to reconcile national responsibilities with cost-effective abatement opportunities. For the EU, the report suggests a domestic trajectory aligned with the 2050 Low Carbon Roadmap (-25% by 2020, -40% by 2030, -60% by 2040, and -80% by 2050) as a minimum unilateral commitment.

The report argues that the EU ETS has failed to drive domestic emissions reductions due to a cap set against inflated projections and a flood of low-quality offsets. It finds that the system is now cancelling out approximately 700 million tonnes of abatement from other EU policies. The author recommends the permanent removal of 1.7 billion allowances from Phase 3 auctions to restore environmental integrity and increase Europe's 2020 climate target to 30% below 1990 levels.