In line with the European Green Deal and the EU's objective to become the first climate neutral economy by 2050, the Commission has launched today a public consultation inviting all interested parties to comment on revised EU Emission Trading System State aid Guidelines in the context of the system for greenhouse gas emission allowance trading post-2021 (the “ETS Guidelines”).
Executive Vice-President Margrethe Vestager, in charge of competition policy, said:“The revision of the EU Emission Trading System State aid Guidelines is an important element of the European Green Deal, aiming at limiting global greenhouse gas emissions. Today, we invite comments on our draft Guidelines which fully reflect the objectives of the Green Deal and focus state support to sectors most at risk of carbon leakage”.
The ETS Guidelines aim at reducing the risk of “carbon leakage”, where companies move production to countries outside the EU with less ambitious climate policies, leading to less economic activity in the EU and no reduction in greenhouse gas emissions globally. The current Guidelines, which expire on 31 December 2020, are under revision and are being submitted to a public consultation in that context.
Through a carbon price signal, the EU ETS creates an incentive for businesses to reduce emissions that contribute to climate change in a cost-effective manner. The ETS generates two types of costs for companies:
(i) direct costs, as companies have to buy the amount of allowances that corresponds to their actual emission level; and
(ii) indirect costs, as companies pay more for the electricity that they consume since electricity producers pass on the carbon price to consumers via electricity prices.
The EU ETS Directive provides for compensation for both types of costs. Under certain conditions, companies can receive free emission allowances reducing their direct costs and Member States can compensate indirect ETS costs as long as this is in accordance with the ETS State Aid Guidelines.
In the context of the European Green Deal, the draft revised ETS State aid Guidelines, would allow Member states to compensate companies for indirect costs under stricter conditions than before.
The Commission has launched today a public consultation on the draft revised Guidelines proposed, which would aim to:
a) shorten the number of sectors eligible for compensation from fourteen to eight, to focus on those most at risks of carbon leakage;
b) lower the compensation rate from 85% at the beginning of the previous ETS trading period (2013 to 2020) to 75% in the new period, and exclude compensation for non-efficient technologies; and
c) make compensation conditional upon decarbonisation efforts by the companies concerned.
The Commission will also make sure that the Guidelines remain consistent with any future legislative developments in the context of the European Green Deal.
The public consultation launched today seeks the views of the relevant stakeholders on the proposed revision of the Guidelines. Stakeholders are invited to submit comments on today's consultation by 10 of March 2020.
The draft Guidelines and all details about the public consultation are available online.
In December 2019, the European Commission has presented the European Green Deal, a roadmap for making the EU's economy sustainable and achieve climate neutrality by 2050 by turning climate and environmental challenges into opportunities across all policy areas and making the transition just and inclusive for all.
The European Union already has a strong track record in reducing its emissions of greenhouse gases while maintaining economic growth. Emissions in 2018 were 23% lower than in 1990 while the Union's GDP grew by 61% in the same period. But more needs to be done. The EU, given its extensive experience, is leading the way in creating a green and inclusive economy.
The EU Emission Trading System (ETS) is a cornerstone of the EU's policy to combat climate change and a key tool for curbing greenhouse gas emissions cost-effectively. Set up in 2005, the ETS is the world's first major carbon market and remains the biggest one. It operates in all 28 EU countries plus Iceland, Liechtenstein and Norway. By putting a price on carbon and trading, it delivers concrete results for the environment: in 2020, emissions from sectors covered by the system will be 21% lower than in 2005.
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