João Aires Coutinho @airescoutinho@qoto.org

There was another massive development in EU #climate #policy last night, as the trilogue on the EU Emissions Trading System (ETS) and Social Climate Fund (SCF) yielded provisional agreement.

Press release for the ETS agreement is here: https://www.europarl.europa.eu/news/en/press-room/20221212IPR64527/climate-change-deal-on-a-more-ambitious-emissions-trading-system-ets , and the release regarding the SCF is here: https://www.europarl.europa.eu/news/en/press-room/20221212IPR64528/deal-on-establishing-the-social-climate-fund-to-support-the-energy-transition .

Three key takeaways:

1. The phasing-out of Free Allocation under the ETS and phasing-in of the Carbon Border Adjustment Mechanism (CBAM) will run from 2026-2034, with the SCF also starting in 2026.

2. The ETS will be extended (via "ETS II") to cover buildings and road transport by 2027. Coverage will also be extended to maritime transport (expected from 2024).

3. The SCF is now expected to yield €65bn in funding from the auctioning allowances, topped up with an additional 25% funded by EU member states. Meanwhile, the ETS "Innovation" and "Modernisation" Funds are also being extended.

However, for me the key hole is the lack of clarity on export carbon leakage measures. 2025 is a long time to wait to see if we can expect export rebates.... interested to hear thoughts from others.

#sustainability #carbon #incentives