The European Commission will “within days” implement measures to update Emissions Trading System (ETS) free allocations benchmarks and enable the Market Stability Reserve to reduce carbon price volatility, says Commission President Ursula von der Leyen.
The benchmark adjustment will “take into account the concerns of industry”, she said after the European Council meeting had concluded after midnight on Friday, Kallanish notes.
In the medium term, the Commission will work on an ETS review which will include “a more realistic trajectory” for free allowances for industries beyond 2034.
It also proposes an “ETS Investment Booster”, a fund of €30 billion ($35 billion), financed by 400 million ETS allowances, assigned to financing projects for decarbonisation. This will operate on a first come, first serve basis, while prioritising funding for lower-income members states.
The European Council said the review should come by July at the latest and should include measures to reduce carbon price volatility and mitigate its impact on electricity prices. But it needs to preserve the “essential role of the ETS in the climate and energy transition through a market-based price signal for carbon emissions that drives investment and innovation”.
As for energy prices, the Commission will prepare a legal proposal to improve the productivity of grid infrastructure and allow member states to reduce grid charges for energy-intensive industries – these average at about 18% in the EU.
It will also propose to mandate lower tax rates on electricity – to make sure that electricity is taxed less than fossil fuels.
In the run-up to the meeting on Friday, ten EU countries, including Italy, Poland and Austria, called on the Commission to bring forward the ETS review to May. Major steelmaking representatives, such as Federacciai, voestalpine and Moravia Steel, have in recent months called for ETS to be overhauled to ease the cost burden on industry. Polish President Karol Nawrocki called for it to be scrapped altogether.
