Innovation is key to secure jobs and achieve EU climate goals

“We must ensure that safeguarding industrial jobs and competitiveness and achieving our climate goals are no longer at odds with one another,” warned Peter Liese MEP, EPP Group climate policy spokesperson and chief negotiator for the European Parliament on the revision of the European Emissions Trading System (ETS), upon presenting his draft report today.

“We must do everything we can to ensure that electricity prices fall. The key to this is investment in innovation. EU countries that get their electricity primarily from climate-neutral domestic energy sources - such as Portugal, Sweden and Finland - have relatively low electricity costs compared to Germany and Italy, which are heavily dependent on fossil fuels. Therefore, emissions trading must provide stronger incentives than before for investment in domestic clean energy. This applies above all to the member states’ revenues. Finance ministers all over Europe have repeatedly caused confusion with accounting tricks. As rapporteur, I am presenting a proposal that further strengthens the Commission’s sound approach in this area.”

In his draft report, Liese calls for not just 50% of ETS revenues to be reinvested in the ETS1 sectors as proposed by the Commission, but as much as 75%. In addition, he proposes a sub-quota for energy-intensive industries that are at risk of relocating their operations and, consequently, of carbon leakage. 

“It is also important to increase the number of free allowances. The Commission proposes increasing them by 47% compared to the current system. I am calling for an even higher increase, particularly for the period up to 2030. In return, however, it is right to require companies to make investments. I propose a gradual start. In 2031, the requirement to make investments should apply only to the portion of free allowances that is new compared to the current system. Over the years, however, the requirement will increase and should be stricter by 2040 than what the Commission has proposed. To be frank: anyone who has not yet started a decarbonisation project by 2040 cannot continue to be supported with free allowances”, said Liese.

The report generally supports the Commission’s approach but modifies it, particularly with regard to the overall reduction in allowances - that is, the reduction pathway, which is crucial for climate protection. “The current system is geared toward achieving the 2030 target because we drastically raised our ambition midway through the decade (due to the Green Deal), the reduction pathway is particularly steep at the moment. No one can seriously claim that it is realistic for all ETS sectors, including the aviation sector, to have zero emissions by 2039. Not even offsetting through the removal of CO2 from the atmosphere is currently possible. The existing system is unrealistic. Adjusting the reduction pathway is fully in line with the EU’s 2040 target and climate neutrality goals”, Liese stated.

The EPP Group insists the companies that have already begun investing must not disadvantaged by the reform. “The Commission’s proposal is supportive of so-called ‘front-runners’. For example, they can receive free allowances until 2040, even though they no longer emit any emissions at all. However, I propose further changes, such as ensuring that the top 10% in each sector not only receive the free allowances they need, but even more, and that there is a stronger focus than before on so-called climate agreements with companies (Carbon Conference for Difference),” added Liese.

All political groups are urged to work constructively to secure an overall political deal on the reform of the ETS by February 2027.