Dr Ian Duncan MEP will spearhead the European Parliament’s reform of the Emissions Trading Scheme (ETS), the EU’s flagship policy to tackle climate change. In a vote today MEPs appointed Ian as ‘rapporteur’ on the ETS file, the title used in the European Parliament for the MEP responsible for drafting reports on key policy objectives. This appointment comes weeks after Ian was a Shadow Rapporteur on the Market Stability Reserve (MSR), a key component of the ETS.
The EU emissions trading system (EU ETS) is the cornerstone of the European Union’s policy to combat climate change and its key tool for reducing industrial greenhouse gas emissions cost-effectively. The first – and still by far the biggest – international system for trading greenhouse gas emission allowances, the EU ETS covers more than 11,000 power stations and industrial plants in 31 countries.
Commenting Ian said:
“The ETS as it stands is broken. This may be our only chance to prove to Europe and the rest of the world that emissions trading systems can work. We need to strike the right balance between protecting industry and jobs, and meeting our climate change obligations. I don’t think those goals are mutually exclusive, but I do know that the EU ETS as it stands is not delivering either.
I want to be as open and as transparent as possible in dealing with this report, taking in as wide a range of views as possible’.
The EU ETS works on the ‘cap and trade’ principle. A ‘cap’, or limit, is set on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. The cap is reduced over time so that total emissions fall.
In 2020, emissions from sectors covered by the EU ETS will be 21% lower than in 2005. By 2030, the Commission proposes, they would be 43% lower.
Within the cap, companies receive or buy emission allowances which they can trade with one another as needed. They can also buy limited amounts of international credits from emission-saving projects around the world. The limit on the total number of allowances available ensures that they have a value.
After each year a company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances. The flexibility that trading brings ensures that emissions are cut where it costs least to do so.
By putting a price on carbon and thereby giving a financial value to each tonne of emissions saved, the EU ETS has placed climate change on the agenda of company boards and their financial departments across Europe. A sufficiently high carbon price also promotes investment in clean, low-carbon technologies.
15 July 2022
8 July 2022