EU agrees on ETS carbon market reform

Image: shutterstock
Image: shutterstock

EU member states came to an agreement regarding the bloc’s the EU Emissions Trading System (ETS). The cap-and-trade system is the EU’s flagship tool for reducing greenhouse gases and meeting its climate goals by regulating emissions at some 12,000 industrial and power installations.

The strongest point of contention was how to use funds from the set up under the trading scheme to modernize energy systems in poorer member states. The EU wanted to block such aid being given to coal-fired plants, which Poland heavily opposed. A compromise was reached under which no funds would go to coal plants with the exception of district heating projects in countries with per capita GDP more than 30 percent below the EU average (Romania and Bulgaria).

“The outcome significantly strengthens the ETS, maintains the environmental integrity of the system, supports innovation and modernization in the energy sector,” Annikky Lamp, a spokeswoman for Estonia, which holds the bloc’s rotating presidency, said in a statement.

Other aspects of the deal include reducing the cap on the total volume of emissions, known as the linear reduction factor (LRF) by 2.2 percent per annum, 57 percent share of carbon credits being sold at auctions, and limit the validity of allowances in the Market Stability Reserve, among others.

The deal needs to be approved by member states and the European Parliament.

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