Page 10 - EurOil Week 26 2021

EurOil POLICY EurOil

EU to propose adjustments

to emissions trading

EU THE European Commission will propose left unchanged, EU analysis says it would only
measures to expand and strengthen the EU’s deliver a 51% reduction in emissions by 2030
The proposal is due to emissions trading system (ETS) next month, to instead of the desired 55%.
be unveiled on July 14. put more pressure on polluters to reduce their Among the other proposed changes to the
emissions. ETS, free permits would no longer be available
The EC will propose making a one-off cut to sectors covered by a planned carbon import
to the number of carbon permits in circulation, levy. Under a separate draft proposal, the EC is
Bloomberg reported on June 29 citing a copy of looking to apply the so-called Carbon Border
the draft document. It also wants to reduce the Adjustment Mechanism (CBAM) to industries
number of permits entering the ETS each year such as steel, cement, aluminium, fertilisers and
at a quicker rate, although that rate has not been electricity.
decided on. The EC also wants to see governments use
The idea is to ensure that the ETS’s “mar- all revenues generated from the ETS for cli-
ket stability reserve” has more of an impact, mate-related purposes, including support for
avoiding a build-up in permits that suppress “low-income households’ sustainable renova-
prices. This reserve will absorb permits above tion.” It will also strengthen a special ETS-based
an 833mn threshold of those in use. When fund for modernisation in low-income member
there are more than 1.096bn spare permits, states. It would get revenues from auctioning
the reserve will absorb 24% of the surplus each an additional 2% of the cap to fund the energy
year until 2030. transition.
The proposal is due to be unveiled on July 14, Other adjustments include the extension
and will come as part of a broader package of of the ETS to shipping, the creation of an adja-
measures to align policies in all sectors with the cent emissions trading programme for heating
EU’s ambitious plan to reach net-zero emissions and road transport, the introduction of Carbon
by 2050. The bloc recently increased its target for Contracts for Difference, which offer investors
reductions by 2030 to 55% from 40%. in innovative technologies a fixed price that
“The ETS is a core instrument to help the EU rewards carbon reductions above the current
achieve the increased 2030 target and a success- price level in the ETS, tougher rules for financ-
ful and just transition towards the 2050 climate ing under the modernisation fund, which will
neutrality,” the EC said in the proposal, accord- no longer support investments related to any oil,
ing to Bloomberg. gas or coal, and provisions to encourage carbon
The ETS is the EU’s flagship climate policy capture and utilisation.
and has already had a significant impact on Modern, highly efficient combined-cycle gas
emissions from the power sector by making coal turbines (CCGT) could potentially benefit from
uncompetitive, as well on other industries. The the changes, at least in markets where they can
cost of permits has doubled over the past two seize market share away from coal. The changes
years alone, surging to a record €56.9 apiece last could also encourage increased LNG use as a
month. Some hedge funds have predicted it will shipping fuel, as it produces considerably less
reach €100 by year-end. CO2 than other oil-based fuels and there are no
But EU officials say the system needs adjust- cleaner alternatives currently available on a com-
ing in light of the bloc’s more ambitious goals. If mercial scale. ™

P10 www. NEWSBASE .com Week 26 01•July•2021