EU approves ETS reform

The European Parliament approved the ETS reform aimed at accelerating the withdrawal of emission allowances available on the EU Emissions Trading System (ETS) carbon market. The reform has been implemented to increase prices for greenhouse gas emissions to over €30 per metric ton. On the one hand, it is supposed to force companies to invest in technologies that stop emissions, capture and store CO2, and, on the other hand, increase the value of funds for modernization for poorer countries. The new regulations, reduce the cap on the total volume of emissions, known as the linear reduction factor (LRF) by 2.2 percent per annum, doubles the Market Stability Reserve cap to curb excess emission allowances on the market. It also sets up a modernization fund to support investments in the generation and use of electricity from renewable sources, improvement of energy efficiency, energy storage and modernization of energy networks. Projects related to energy production using solid fossil fuels, including coal will be excluded, except for district heating in Bulgaria and Romania. According to the Polish Electricity Association (PKEE) calculations, the largest power utilities in Poland will spend some PLN 130 billion on the purchases of CO2 emission allowances in the years 2021-2030. “This decision is part of the broadly understood trend of decarbonization and it will result in an increase in the price of emission allowances and will probably translate into the price of energy on the wholesale market,” said Tauron CEO Filip Grzegorczyk. The reform also promises profits for the sector in form of solidarity mechanisms and free allowances, which for Poland are estimated at PLN 65 billion.