The European Commission has released its long-awaited review of the EU ETS carbon pricing system, rolling out a suite of balanced reforms: to ease industrial cost pressures amid high energy prices triggered by geopolitical conflicts, it will lower the annual emissions cap reduction rate (Linear Reduction Factor) from 2031, extend free carbon allowance distribution to 2038 for CBAM-covered industries and prolong allowance supply into the 2040s; it will also integrate 250 million tonnes of domestic permanent carbon removals into the ETS to support hard-to-abate sectors and foster the carbon removal market. Meanwhile, the plan ramps up industrial decarbonization investment by mandating EU countries allocate half of their ETS revenues to relevant green projects, setting up a €100 billion Industrial Decarbonisation Bank (with a €30 billion early investment incentive scheme), and tying future free allowances to companies’ mandatory EU decarbonization investments equivalent to the full value of their free permits. Additional adjustments expand ETS coverage to more international aviation flights, small maritime vessels and waste incineration, plus targeted support for EU sustainable fuels and clean tech. First launched in 2005, the ETS has generated over €270 billion revenue and delivered a 50% emissions cut in covered sectors, and the new proposals, aligned with the EU’s 2040 90% emissions reduction target and 2050 climate neutrality goal, will now enter negotiation procedures between the European Parliament and Council for formal adoption.
Source: https://www.esgtoday.com/eu-taps-the-brakes-on-ets-carbon-pricing-system/