The recent drop in prices on the EU’s Emissions Trading System (EU ETS) threatens to slow industrial decarbonisation and to deprive state treasures of urgently needed funds for climate action.
The EU Emissions Trading System is a cornerstone of the European Union’s climate policies, yet it is poorly understood. Here, we answer some frequently asked questions about the EU ETS.
A large part of heavy industry carbon emissions is exempted from ETS obligations. The allocation system of free emissions allowances was designed to shield European heavy industries from the purported risk of “carbon leakage”, the alleged risk that industries will relocate their production outside of the EU to countries or regions with more lenient carbon emission policies.
Revenue from the EU’s Emissions Trading System (EU ETS) continues to be spent on subsidising heavy industry pollution rather than on climate action and ending energy poverty.