Directive (EU) 2018/410 (Text with EEA relevance. )

What it is

to amend the EU emissions trading system (EU ETS) in order to enhance cost-effective emission reductions and promote low-carbon investments. PROPOSED ACT: Directive of the European Parliament and of the Council. ROLEOF THE EUROPEAN PARLIAMENT: the European Parliament decides in accordance with the ordinary legislative procedure and on an equal footing with the Council. BACKGROUND: Directive 2003/87/EC of the European Parliament and of the Council established a system for greenhouse gas emission allowance trading within the Union in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner. The Committee on the Environment, Public Health and Food Safety adopted the report by Ian DUNCAN (ECR, UK) on the proposal for a directive of the European Parliament and of the Council amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments. The Committee on Industry Research and Energy, exercising its prerogative as an associated committee in accordance with Article 54 of the Rules of Procedure, also gave its opinion on the report. The committee responsible recommended that the European Parliament’s position, adopted at first reading following the ordinary legislative procedure, should amend the Commission proposal as follows: Purpose : it is stipulated that the objective of the Directive is to achieve a certain level of emissions reductions in a way that does not lead to carbon and investment leakage. Members stated that a well-functioning, reformed EU emission trading system (EU ETS) with an enhanced instrument to stabilise the market and the removal of a significant number of surplus allowances from the market will be the main European instruments to achieve this target. Members advocated increasing the so-called “linear reduction factor” - the yearly reduction of credits, in order to deliver on the carbon curbs - by 2.4%, as against the 2.2% proposed by the European Commission. Allocation and issuing of quotas : according to the report, unused free allowances should be made available to help address the risk of carbon leakage in industries with high carbon and trade intensity. From 2019 onwards, Member States shall either auction or cancel allowances that are not allocated free of charge and are not placed in the market stability reserve. From 2021 onwards, the share of allowances to be auctioned or cancelled shall be 57 % , and that share shall decrease by no more than five percentage points over the entire ten year period beginning on 1 January 2021. In addition, 3 % of the total quantity of allowances to be issued between 2021 and 2030 shall be auctioned in order to compensate sectors or sub-sectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs actually incurred as a result of greenhouse gas emission costs being passed on in electricity prices. Members also agreed that 800 million allowances should be removed from the Market Stability Reserve as of 1 January 2021. Just Transition Fund : this Fund shall be created as of 1 January 2021 as a complement to the European Regional Development Fund and the…

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