Why should the EU’s Emission Trading System be more ambitious?

By signing the Paris climate agreement, many countries vowed to keep the global temperature rise below two degrees centigrade. The emissions trading scheme is the most important European instrument in battling climate change.

But if the current policies are maintained, the emissions from businesses that are currently affected by the Emissions Trading System will only -in the best case- reach zero around the year 2058. This level of ambition does not correspond with the targets set in the Paris agreement. To keep the global rise in temperature below 1.5degrees centigrade, the global emission of CO2 should already be zero in 2050.

The good news is that the European Commission introduced a review of the EU ETS with its Fit for 55 package (july 2021). It included a rebasing of the Cap and raising the linear reduction factor from 2.2 to of 4.2%. This should lead to a reduction in emissions of 61% in 2030 compared to 2005 levels. Although this is a step in the right direction, it is not ambitious enough to ensure we stay within the 1.5 degrees limit. To ensure this, a UNEP reports shows the EU should reduce its emissions to 68% in 2030. This is why WISE campaigns for furthering lowering of the Cap in the EU ETS revision. 

In addition, there is room for more ambitious policy choices in the other aspects of the EU ETS. The market stability reserve should be strengthened, CBAM could be implemented much faster and free allocation faced out much sooner. In addition, the aviation and shipping sector should be included in the EU ETS  much sooner than proposed. 

Simply put: the emissions trading scheme should be made 'Paris proof'. And that's possible. Remember, a relatively small number of companies is responsible for the largest part of the CO2-emissions in Europe. Given the targets set in the Paris agreement, it is only logical to stimulate these companies to invest in environmental-friendly technologies right now.


Emission trading