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.
- 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.
- 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.
- Full auctioning of emission allowances
- 100% ETS auctioning revenues earmarked towards industrial innovation, modernisation, just transition and international climate finance
- Do not include road transport and buildings
- Include international maritime transport and waste incineration
- If CBAM is implemented, extend the EU ETS to cover importers’ emissions and phase out other carbon leakage measures
- No Carbon Dioxide Removal (CDR) credits
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