European Emissions Trading

The European Emissions Trading Scheme (EU ETS) will be aligned with the European climate protection target of reducing emissions by at least 55% by 2030 compared to 1990. In May and June 2023, the legal acts entered into force. Now the European Commission, in agreement with the member states, must draw up a variety of rules to implement the reform.

In order to achieve the EU's 2030 climate target, a reform of the EU Emissions Trading Scheme (EU ETS) is necessary. The amount of issued certificates is to be reduced and the financial support for climate protection measures expanded. In addition, maritime transport is to be covered by the EU ETS in future and a new emissions trading scheme for buildings and road transport is to be created.

Apart from aligning the cap with the new climate target for 2030, the upcoming EU ETS reform also includes a review of the market stability reserve (MSR). A research project commissioned by the UBA proposes to adjust central MSR parameters in order to strengthen its function to stabilize the market in the event of external shocks such as the Covid-19 pandemic.

Minimizing cumulative emissions is essential for reducing the risk of overshooting the warming limit of 1.5 degrees. This study commissioned by the German Environment Agency analyses the implications for the EU ETS and presents different scenarios for this goal. The authors conclude that the cap reduction factor should be increased to 4 percent starting from 2021 or 5.8 percent starting from 2026.

A research report commissioned by the UBA has analysed a range of options for designing the EU Innovation Fund (IF), a financing instrument created under the EU Emissions Trading System to support demonstration projects for low-carbon innovation in the power sector and industry. From 2019 onwards, this fund will use revenues from auctioning emissions trading allowances for this purpose.