Key elements for the revision of the EU ETS

The upcoming revision of the EU Emission Trading System represents a crucial opportunity to strengthen the Directive and ensure it contributes to the goals of the Paris Agreement. 

Carbon Market Watch believes that the upcoming review should include the following elements. 

1. An increase of the Linear Reduction Factor (LRF) and a one-off reduction of the cap, with the aim to reach zero emissions by 2040 to make the EU ETS compatible with the goals of the Paris Agreement.
2. A strengthened Market Stability Reserve: the intake rate should be increased to 36% from 2024 onwards, declining thresholds should be adopted and an automatic cancellation for allowances held in the MSR for more than five years should be set.
3. Full auctioning of emission allowances
4. 100% ETS auctioning revenues earmarked towards industrial innovation, modernisation, just transition and international climate finance
5. Do not include road transport and buildings
6. Include international maritime transport and waste incineration
7. If CBAM is implemented, extend the EU ETS to cover importers’ emissions and phase out other carbon leakage measures
8. No Carbon Dioxide Removal (CDR) credits

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