Search Climate Insights Directory

An open letter from multiple environmental and industrial organisations calling for the EU ETS to be strengthened by increasing reduction factors, eliminating free allowances for industry and aviation, and reinvesting auction revenues into the green transition. The authors argue that free allocation creates market failures and windfall profits while slowing decarbonisation, and they specifically oppose the creation of a Carbon Leakage Protection Reserve in favour of the Carbon Border Adjustment Mechanism (CBAM).

The report argues that while Europe has significant theoretical CO2 storage capacity, actual deployment is hindered by a funding gap, regulatory barriers to cross-border transport, and a lack of coordinated infrastructure. It recommends shifting from project-based funding to system-based approaches, implementing carbon contracts for difference (CCfDs), and establishing a market for low-carbon products. The authors call for a formal EU strategy to set milestone targets and coordinate the development of large-scale, open-access storage sites beyond the North Sea.

A coalition of NGOs argues that releasing 200-250 million allowances from the Market Stability Reserve to generate EUR 20 billion for REPowerEU would increase atmospheric emissions and fund fossil fuel infrastructure, thereby undermining the European Green Deal and the Paris Agreement.

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.

Reclaim Finance criticizes RWE for maintaining a coal phase-out target of 2038, which it claims is eight years behind scientific recommendations. The organization highlights RWE's role as one of Europe's largest CO2 emitters, its reliance on fossil gas as a bridge fuel, and its efforts to obtain €2.6 billion in compensation from the German government. It specifically calls on major shareholders, including Crédit Agricole/Amundi, Société Générale, and BNP Paribas, to use the upcoming AGM to sanction the company's lack of a coherent transition strategy.

The authors evaluate the EU and German recovery funds, noting that while they are framed as 'green', much of the funding remains conditional or vague. They contrast this with the 2008 financial crisis, where green investments were limited. The text emphasizes the role of the European Parliament in ensuring accountability and pushing for a 60% CO2 reduction by 2030, while warning that Germany's current plans may not meet its 65% renewable energy target due to restrictive zoning laws and continued fossil fuel subsidies.

Carbon Market Watch outlines recommendations for the EU ETS II, emphasizing that emission allowances should be auctioned rather than allocated for free to ensure the 'polluter pays' principle. The author argues that the estimated annual average revenue of €47 billion (2026-2030) should be recycled into socially fair compensation schemes for energy efficiency and renewable energy to protect low-income households. Additionally, the document asserts that carbon pricing must be complemented by regulatory frameworks, such as vehicle emission standards and energy performance requirements for buildings, as pricing alone is insufficient to drive full decarbonization.

The report evaluates the impact of expanding the EU Emissions Trading System (EU ETS) to cover more European aviation flights compared to the European Commission's (EC) proposal, which retains the EU ETS for intra-EEA flights and uses CORSIA for flights between the EEA and other participating states. Using the AERO-MS model, the study finds that expanding the EU ETS to include all outgoing flights (Scenario 1) or all outgoing and incoming flights (Scenario 2) would significantly increase emission reductions and auctioning revenues, though at a higher cost to airlines. Specifically, Scenario 2 would result in a 113% higher emission reduction than the EC proposal. The report also highlights uncertainties in CORSIA's effectiveness, noting that changes in the baseline or non-participation of major aviation countries could reduce its emission reductions by up to 77%.

The document addresses the rise in EU ETS carbon prices, which reached €98.49 on 8 February 2022. It refutes claims from energy-intensive industries and countries like Poland and Spain that speculative trading is causing price spikes, noting that speculative activity accounts for only about 4% of ETS activity. The author opposes a proposal by MEP Peter Liese to release 100 million additional allowances if prices remain high for six months, arguing this would undermine emission reduction goals. Instead, the document advocates for reducing the oversupply of credits, ending free allowances, and aiming for a 70% reduction in ETS emissions by 2030 to provide a stable price signal for industrial decarbonisation.

The briefing assesses the failure of the EU ETS to reduce emissions in the steel sector, which accounts for 221 megatonnes of CO2 annually. It identifies flaws such as excessive free allowances and stagnant benchmarks—particularly for hot metal—that have led to flatlining emissions since 2012. The author proposes replacing free permits with a Carbon Border Adjustment Mechanism (CBAM) and increasing funding for the Innovation Fund to support zero-carbon technologies like hydrogen direct reduction.

The document outlines eleven specific recommendations to strengthen the EU ETS, arguing that the European Commission's proposal lacks sufficient ambition and fails to properly implement the 'polluter pays' principle. Key demands include increasing the 2030 emission reduction target to 70% for ETS sectors, phasing out free emission allowances for energy-intensive industries, and expanding the system's scope to include waste incineration and all international shipping voyages. It also suggests strengthening the Market Stability Reserve (MSR) to prevent price crashes and calls for stricter criteria for the use of ETS revenues to ensure they support climate action. Additionally, the guide provides a communication framework based on urgency, risk, and fairness, alongside a directory of key policymakers in the European Commission and Parliament.

The document asserts that the EU's current target to reduce greenhouse gas emissions by at least 55% by 2030 is incompatible with the 1.5°C temperature goal of the Paris Agreement. It argues that the EU would require double its per capita share of the remaining global carbon budget under current policies. The author suggests the EU should instead target at least a 65% reduction by 2030 and achieve climate neutrality by 2040. To achieve this, the briefing recommends reforming the EU ETS by rebasing emission levels to actual 2020 levels and increasing the annual linear reduction factor beyond the proposed 4.2%.

The briefing evaluates MEP Mohammed Chahim's draft report on the Carbon Border Adjustment Mechanism (CBAM), focusing on the phase-out of free allowances, the extension of sectoral scope, financial support for Least Developed Countries, the allocation of revenues, and the handling of export rebates.

The document analyzes the EU's proposed Carbon Border Adjustment Mechanism (CBAM), which aims to prevent carbon leakage by imposing a carbon price on imports in sectors like iron, steel, cement, aluminum, fertilizers, and electricity. It specifically examines the phase-out of free EU ETS allowances, the exclusion of export rebates, the scope of emissions (direct vs. indirect), and the crediting of third-country climate policies. Swedish stakeholders are divided: industry groups generally fear competitiveness losses due to the lack of export rebates and the exclusion of Scope 2 emissions, while environmental groups advocate for a faster phase-out of free allowances.

Analysis by Carbon Limits for Clean Air Task Force estimates a cumulative €10 billion funding gap by 2030 for announced carbon capture and storage projects in Europe, representing non-recoverable costs after accounting for EU Emissions Trading System savings and existing funding. While the EU's Innovation Fund is the primary contributor, the document argues that further public support at the EU and national levels—similar to the Netherlands' SDE++ programme, which awarded up to €2.1 billion in 2021—is essential to cover first-mover costs and establish CO2 transport and storage infrastructure.

ClientEarth and the European Environmental Bureau (EEB) have expressed serious concerns regarding the European Commission's revision of the State aid Guidelines on climate, environmental protection and energy (CEEAG). They argue that the Commission is favoring energy intensive users (EIUs) by potentially expanding aid eligibility to companies only 'at risk' of carbon leakage, rather than those at 'significant risk'. The authors contend that the risk of carbon leakage remains 'unproven' and that maintaining reductions in electricity levies for EIUs contradicts the European Green Deal and the Polluter Pays Principle. They advocate for 'Option E2' (the ETS list), which would restrict aid to 14 eligible sectors, resulting in an estimated 89% annual budget reduction and 'much lower competition distortions'. Additionally, the letter criticizes the Commission's governance, alleging a breach of EU jurisprudence by failing to make impact assessments publicly accessible before adopting proposals.

The document outlines the EU's proposed Carbon Border Adjustment Mechanism (CBAM), designed to prevent carbon leakage by requiring importers to purchase certificates for embedded emissions in specific goods. It details the sectors covered, the calculation of emissions, the phase-out of free ETS allowances, and the transitional period from 2023 to 2025. Carbon Market Watch critiques the proposal for excluding bulk chemicals and indirect emissions, the slow phase-out of free allocations, and the plan to use revenues for COVID-19 debt repayment rather than international climate finance.

Carbon Market Watch and signatory organisations argue that the European Commission's proposal for the EU ETS revision fails to apply the 'polluter pays principle' by continuing free pollution permits. They contend that free allocations have stagnated industrial decarbonisation, noting that over 200 billion euros in allowances have been distributed since 2008 while emissions reductions remained below 0.4% annually since 2013. The document calls for full auctioning of allowances to internalise carbon costs and generate revenue for clean technology, warning that the Commission's plan for 5 billion free allowances between 2021 and 2030 could represent a subsidy of approximately 400 billion euros at current prices.

A joint statement by five NGO networks providing policy recommendations for the EU's Carbon Border Adjustment Mechanism (CBAM), focusing on the phase-out of free allowances, expanded scope, support for vulnerable nations, and the rejection of export rebates.

A coalition of environmental organizations warns the European Commission that the Sustainable Carbon Cycles Communication risks undermining climate ambition if it allows carbon removals to be used as offsets for emissions. While supporting the Carbon Removal Certification Mechanism and improved climate accounting by 2028, the authors argue that removals should not be treated as tonne-for-tonne equivalents to emissions reductions. They specifically oppose the inclusion of removal offsets in the EU ETS, ESR, and LULUCF regulations, and call for a strict definition of storage permanence to distinguish real removals from short-term carbon stores.