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EU Member States agreed on future of EU Emissions Trading System
At the environment minister meeting on 28 February, the EU Member States agreed on the design of the EU Emissions Trading System (EU ETS) post-2020. The agreement includes important measures for strengthening the EU ETS price signal and adapting the system to the Paris Agreement. The Swedish position in favour of raising the price of emissions gained support following tough negotiations at the ministerial meeting.
"At a time when the world needs climate leadership more than in a long time, it is important that the EU delivers in the area of climate. An efficient emissions trading system with a strong price signal is crucial if the EU is to achieve its climate targets under the Paris Agreement," says Minister for International Development Cooperation and Climate Isabella Lövin.
A key part of the agreement is that more emission allowances will be removed from the market between 2019 and 2023. There is currently a large surplus of emission allowances amounting to almost 1.7 billion tonnes. This large surplus has also led to constantly low prices within the EU ETS. The new proposal involves an initial stage in which almost one billion emission allowances are removed from the market between 2019 and 2023. Today's decision means that a large volume of emission allowances in the market stability reserve will be cancelled in 2024 and subsequently at regular intervals, following a proposal from Sweden.
"It is very positive to see the Swedish proposal receive support in the Council. This means a doubling of the number of emission allowances being cancelled compared with the proposal that was on the table this morning. It must pay to be climate-smart and it must cost to put off the necessary transition that we must now undertake," says Ms Lövin.
Background to the reform of the EU Emissions Trading System post-2020
The Emissions Trading System covers approximately 45 per cent of emissions in the EU from electricity production and industry. In July 2015, the European Commission presented a proposal to review the trading system ahead of the period 2021–2030. The EU Member States have been negotiating the proposal for more than 18 months. The negotiations have focused on measures to strengthen the EU ETS price signal and on rules for the free allocation of emission allowances to sectors subject to international competition, such as steel, pulp and paper, and the chemicals industry.