Agreement on the Emission Trading System

Brussels 13/12/08

Agreement between the EP and Council on EU ETS
Today around lunchtime the European Parliament and the Council struck a deal on how to reform the EU Emission Trading Scheme.

– Unfortunately we have missed the chance to create a well functioning trading system but at least the result of the deal means improvements compared to how the system functions today, says Jens Holm and GUE/NGL shadow rapporteur.

– It is very disappointing that up to 50% of the total reduction efforts under the ETS will be allowed to take place outside the EU through Clean Development Mechanism projects. But at least we have a cap of these projects and the possibility to restrict the use of them if the quality proves to be inferior, Holm continues.

– I am happy with the fact that the principle of auctioning, that you have to pay for your emission rights, becomes dominant which is a great difference in comparison to the current system. Unfortunately the deal includes many derogations from this principle. It could have been much better, says Holm.

Today’s deal includes the following:
* The new provision will enter into force in 2013:
* The EU ETS sectors will need to reduce their total emissions with the 21% by 2020 in comparison with 2005 emissions levels;
* 100% auctioning for the power sector but with derogations for the basically the new Member States (including Italy). These countries will receive 70% of their emission allowances for free in 2013 but which will gradually decrease to 2020 when full auctioning will apply;
* Remaining sectors will receive 80% of their emission allowances for free in 2013 but which shall decrease to 30% in 2020. Not until 2027 will 100% auctioning apply;
* Those sectors that might be subject to carbon-leakage (international competition), eg the steel, cement, paper – and chemical industry,  will receive all their emission allowances for free;
* At least 50% of the auctioning revenues should go to climate mitigation and adaptation measures (EU and developing countries) but this is only voluntarily for the Member States;
* A CDM cap is set to 50% of the total reduction effort. Measures is also introduced that will safeguard the quality of this projects.