European Commission to propose in March extending EU ETS CO2 trading to transport

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Brussels —
The European Commission plans to include extending the EU’s Trading System “to all relevant sectors,” including transport, in a draft European to be proposed in March, new EC Ursula von der Leyen said Monday.

The draft law is to include a binding target for the EU to become a climate-neutral net-zero carbon economy by 2050, raising the EU’s ambition from its current non-binding goal to cut its emissions by at least 80% from 1990 levels.

“CO2 has to have a price,” von der Leyen said on the first day of the UN climate conference COP25 in Madrid, where more than 190 nations have come together for two weeks of talks on implementing the Paris global climate agreement.

She said the EC would present the first outline of her promised European Green Deal on December 11, which is the day before EU leaders meet in Brussels to discuss whether to make a political commitment to have a net-zero carbon economy by 2050.

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An incomplete draft of this outline leaked to media last week said the EC would propose extending the EU ETS to shipping and reduce free allowances allocated to airlines.

It would also assess how to include road transport emissions in the ETS “to complement existing and future strengthened CO2 emission performance standards for vehicles.”

The EU ETS currently covers heavy industry, such as generation, steel works and refineries, as well as intra-EU .

HIGHER 2030 CO2 CUTS

The draft European Green Deal outline said the EC would present plans by October on how to increase the EU’s binding 2030 target to cut CO2 by at least 40% from 1990 levels “to at least 50% and toward 55% in a responsible way.” The EC would “review and potentially revise all relevant legislative measures to deliver on this renewed ambition,” the draft said.

The EC only finalized the EU’s binding 2030 target to source at least 32% of its final from renewables and a non-binding 2030 target to improve its efficiency by at least 32.5% in directives adopted at the end of 2018.

It usually takes at least two years for proposed changes to EU directives to be debated and approved by the European Parliament and EU Council, representing national governments.

Governments then have usually around two years to transpose the agreed changes into national law.

That means any more ambitious 2030 EU goals might not be enshrined in national law until nearly 2025, leaving national governments only five years to achieve them.

Under the current directives, governments have to submit finalized national energy and climate plans by the end of this year setting out how they intend to contribute to meeting the EU’s 2030 targets.

SECURITY, AFFORDABILITY

Sustainability is still only one pillar of the EU’s , the EC’s energy deputy director general, Klaus-Dieter Borchardt, said last week.

The other two remain security of supply and affordability, he told the Central European Day of Energy in Brussels on Thursday.

“If we fail on one, all three are in jeopardy,” he said.

He called for a “sound impact assessment” of any new sustainability proposals.

“If we lose the balance, we will need measures to bring up security of supply and affordability,” Borchardt said.

EUR1 TRILLION GREEN INVESTMENT

The EC plans to set up a Sustainable Europe Investment Plan to leverage Eur1 trillion ($1.1 trillion) for greening the EU’s economy to 2030, von der Leyen told the COP25 meeting.

“The European Green Deal is Europe’s new growth strategy. It will cut emissions while also creating jobs and improving our quality of life,” she said.

This would need investment in research, innovation and green technologies.

“If necessary, if there is carbon leakage, we will have to think about a carbon border tax,” she added.

The leaked draft European Green Deal outline does not mention a carbon border tax, although von der Leyen promised to propose one in her political guidelines published before she was confirmed as president this summer.

Von der Leyen and her new college of 26 EU commissioners — one for each EU country except the UK — started their five-year mandate on Sunday.

The UK plans to leave the EU by the end of January.

–Siobhan Hall, siobhan.hall@spglobal.com

–Edited by Alisdair Bowles, alisdair.bowles@spglobal.com

Source: Platts

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