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A joint letter from various organisations calling for a 'people first' approach to EU ETS revenues, recommending stricter earmarking rules to prevent fossil fuel lock-in, the phase-out of free allowances for polluters, and the expansion of the Social Climate Fund to protect vulnerable citizens from ETS2 costs.

The document assesses the effectiveness of the EU ETS and CORSIA in addressing aviation emissions, finding that both schemes fail to cover non-CO2 effects and that CORSIA's reliance on low-quality offsets and a high baseline limits its climate impact. It recommends extending the EU ETS to all flights departing from the European Economic Area (EEA) by 2027.

The report finds a substantial divergence in ambition between the EU ETS and CORSIA. While the EU ETS is moving toward 100% auctioning of allowances by 2026 and high carbon prices, CORSIA relies on offsetting emissions above a baseline, resulting in significantly lower emissions coverage and a much weaker price signal. The EU may expand the EU ETS to extra-EEA flights by 2027 if CORSIA is deemed insufficient to meet climate goals.

The report uses a GTAP-E model to find that a USD 100/t carbon levy would generally reduce GDP and household incomes across Africa, increase global food prices, and reduce the supply of maritime services. It highlights that African importers already face disproportionately high freight rates, which a carbon tax would exacerbate. The authors recommend that the IMO implement a redistribution mechanism based on climate vulnerability and historical emissions, providing direct grants for out-of-sector projects like green hydrogen and resilient agriculture.

The letter argues that current public funding is insufficient to bridge a €620 billion annual investment gap needed for the Green Deal and REPowerEU. It recommends that all ETS revenues be allocated to climate action, specifically prioritising the development of a competitive clean industry. The authors call for the redirection of the 25% of revenues currently allowed for indirect carbon cost compensation toward scaling strategic clean technologies, noting that €92 billion is needed by 2030 for just six such technologies. Finally, it demands transparent reporting of ETS revenue allocations to ensure accountability and allow for scrutiny by the European Commission and civil society.

The Clean Air Task Force (CATF) outlines key policy priorities for the incoming European Commission, emphasizing the need for a 'Clean Industrial Deal' that aligns competitiveness with a 90% emissions reduction target by 2040. The document advocates for 'clean firm power'—including geothermal, nuclear, and CCS—to complement renewables and ensure grid reliability. It calls for a 'reality check' on hydrogen targets, a more ambitious implementation of the Methane Regulation (including agricultural emissions), and the development of a clear strategy for carbon removals and emerging technologies like fusion and superhot rock geothermal energy.

Carbon Market Watch strongly opposes integrating greenhouse gas removals (GGRs) into the UK ETS, asserting that emissions and removals are not equivalent and that such a move would cause mitigation deterrence. The organization argues that GGRs are a weaker form of mitigation and that their inclusion could lead to an overreliance on cheap, unsustainable options. If integration were to occur, they insist on maintaining the gross cap, issuing allowances ex-post, and implementing a strict permanence framework. They specifically oppose the inclusion of woodland units due to their lack of permanence and the 'carbon debt' they create. Instead, they recommend 'indirect inclusion' where ETS revenues fund GGR projects, or the creation of a separate Removals Trading Scheme.

The author contends that the rise of far-right parties, such as Germany's AfD, is partly a reaction to climate policies that lack social equity. To combat this, the text advocates for a 'post-growth' framework and the implementation of community-led energy solutions that prioritize human well-being over profit. It calls for developed nations to accelerate emission cuts and for the EU to shift fossil fuel subsidies toward carbon-free heating to ensure a just transition.

The document argues that the steel sector is no longer 'hard-to-abate' due to advancements in green hydrogen and electric arc furnaces. It challenges the distinction between metallurgical and thermal coal, warns against reliance on CCUS, and highlights the risk of stranded assets. The briefing urges financial institutions to adopt strict sectoral policies to end financing for new blast furnaces and metallurgical coal projects while increasing investment in sustainable alternatives.

Sweden adopted a net-zero target in 2017 with a broad scope, limited offsets, and interim targets for 2020, 2030, and 2040. To ensure durability, the country passed the Climate Act, which mandates a climate action plan every four years, annual budget alignment, and oversight by an independent Climate Policy Council. While emissions have generally declined since the 1990s and the 2020 interim target was met, recent political changes—including the removal of a dedicated Ministry for Climate and Environment and a reduction in biofuels requirements—have led to concerns about the deprioritization of near-term action in the December 2023 Climate Action Plan.

Carbon Market Watch warns that heavy industry is projected to consume 60-80% of Flanders' EU ETS revenues between 2024 and 2030 through indirect cost compensation subsidies. The author argues these subsidies support the status quo and lack environmental safeguards, noting that a 2021 Deloitte report found no expected impact on employment or relocation if such subsidies were reduced. The document proposes capping industrial funding at 30% of ETS revenue to protect funds for transport and housing transitions.

The EU Carbon Border Adjustment Mechanism (CBAM) is a regulatory tool designed to prevent 'carbon leakage' by applying a carbon price to specific imported goods, matching the price paid by EU producers under the EU Emissions Trading System (EU ETS). The mechanism covers cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. It involves a transitional monitoring period starting in October 2023, followed by a definitive phase-in in 2026. Importers must purchase and surrender non-tradeable certificates based on the embedded emissions of their goods. The document highlights the necessity of phasing out free ETS allowances to ensure the CBAM's effectiveness and discusses the potential for reinvesting CBAM revenues into climate mitigation in developing economies.

The EU Emissions Trading System (EU ETS) requires companies in power, heavy industry, aviation, and shipping to purchase emission allowances via auctions, with revenues distributed to 30 covered countries. While the 2023 reform mandates that revenues be spent on climate-related activities, historical data from 2013-2021 shows €25 billion was not spent on climate action and €12 billion went to projects that were not climate-sensible or could have increased emissions. The system utilizes a mix of auctioning and free allocations to prevent carbon leakage, though free allocations for aviation will end in 2026 and for heavy industry by 2034. Key funding mechanisms supported by these revenues include the Innovation Fund, expected to raise over €57 billion by 2030, and the Modernisation Fund, expected to invest €69.5 billion in 13 lower-income member states between 2021 and 2030.

Carbon Market Watch supports the draft Delegated Act on permanent carbon capture and usage (CCU) within the EU ETS, praising its strict permanence criteria and 'white-list' approach for products. However, it warns that the 'end of life' criteria must account for CO2 release via deterioration and calls for greater transparency in how products are added to or removed from the approved list.

The briefing outlines how the EU can sustain its climate leadership following the June 2024 elections by linking emissions reductions to energy security, consumer cost savings, and industrial competitiveness. It highlights the success of the RePowerEU Plan in reducing Russian gas imports and notes that wind and solar power saved EU consumers approximately EUR 100 billion between 2021 and 2023. The document emphasizes that investing in green technology and implementing social safety nets, such as retraining programmes, will ensure the transition is competitive and inclusive.

The author warns that a rightward political shift in the EU and UK could lead to the rollback of climate regulations and the weakening of the European Green Deal. While EU citizens express high levels of concern for climate change, competing priorities like security and healthcare may lead them to vote for parties hostile to green policies. The text urges activists to combat political apathy and maintain climate action on the political agenda even if climate-skeptical forces gain power.

The document outlines a detailed schedule of EU ETS and CBAM milestones from 2024 to 2034. Key developments include a shrinking emissions cap, the phase-out of free allowances for aviation, the gradual integration of shipping and municipal waste incineration, and the phased implementation of CBAM. It also details the rollout of the ETS for buildings and road transport (ETS2) and the associated Social Climate Fund, alongside various European Commission reviews of the ETS Directive and Market Stability Reserve.

The document outlines the two primary types of carbon markets—cap-and-trade and carbon crediting systems—and distinguishes between compliance markets, which are based on obligatory targets, and voluntary markets used for corporate social responsibility. It highlights the role of Article 6 of the Paris Agreement in establishing new international market mechanisms. The text critically assesses carbon offsetting, particularly REDD+ forestry projects, noting that they often generate exaggerated credits and lack adequate safeguards. It concludes that carbon credits cannot scientifically be proven to reliably neutralise one tonne of CO2 and recommends that companies move toward a 'climate contribution' or 'beyond value chain mitigation' (BVCM) model to provide climate finance without making misleading offsetting claims.

The EU Emissions Trading System (EU ETS) is a cap-and-trade mechanism designed to reduce greenhouse gas emissions in the power, heavy industry, aviation, and maritime sectors by pricing pollution. It operates by setting a decreasing cap on total emissions, divided into EU Allowances (EUAs), which companies can trade or buy at auction. While the system has raised over €152 billion since 2005, its effectiveness has been historically hampered by an oversupply of permits and the extensive use of free allocations to prevent 'carbon leakage'. A separate system, ETS2, will be introduced in 2027 to cover buildings and road transport. The document highlights concerns regarding the environmental integrity of the current cap relative to the EU's carbon budget and the lack of transparency in how member states spend auction revenues.

Carbon Market Watch criticizes the EU's Carbon Removal Certification Framework (CRCF) provisional deal, claiming it allows carbon removals and temporary storage to substitute for actual emission reductions. The organization warns that the framework enables double counting between voluntary markets and national climate policies, incentivizes short-term carbon storage that lacks long-term climate benefit, and employs insufficient sustainability criteria for biomass. While noting some positive inclusions like mandatory biodiversity co-benefits for carbon farming, CMW asserts the CRCF is a 'missed opportunity' that could deter climate action and calls for the deal to be rejected and rebooted.