Emissions Trading System
22 December 2016


The negotiations on the post 2020 EU ETS directive review progressed significantly in the last months. 


On December 19th 2016, the Slovak Presidency presented a progress report at the Environment Council. Good solutions for a range of technical issues are believed to be found, but few political questions still remained. Among the outstanding political issues, the measures to strengthen the ETS in short and long term (such as increase of the LRF and changes to the MSR) are still to be discussed as well as measures to prevent the need for CSCF applied to free allocations to industry. Few Members States expressed their support to lower the auction share below the 57% proposed by the EC. Some wish to better target the carbon leakage protection. The Maltese Presidency will continue work on the dossier.


In the meantime in the European Parliament, on December 15th 2016, the ENVI adopted a report, prepared by MEP Duncan, which calls for a more ambitious post-2020 EU ETS package. MEPs supported tightening of the ETS cap with a steeper LRF of 2.4% from 2021 and introducing ambitious changes to the MSR. The ENVI report also backed a compromise solution of a 57% auction share with a possibility to decrease it by 5%, if CSCF is triggered. MEPs supported the EC proposal for a binary carbon leakage list (no “tiered approach”), however with a possibility of a “tiered CSCF”, in case CSCF is applied. Consequently few selected sectors would be exempted from the application of the correction factor at the expense of other industries. A new provision was included proposing an import inclusion scheme (or border adjustment mechanism - BAM) for sectors below 10% of trade intensity. Those sectors would not be granted any free allowances once the mechanism is in place. The BAM provision concerns directly cement, lime and ceramic bricks, roof tiles and clay pipes sectors. This proposal continues to unfairly differentiate between the energy intensive industries. The ENVI endorsed also few positive elements, such as a lower threshold for a qualitative assessment (0.12) and a possibility for relevant level of disaggregation.


The European Parliament will hold a vote in plenary in February, which shall allow an informal trialogue between the EP, the Council and the Commission.