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How will the Commission correct the mistake of punishing industries that are curbing their emissions?

Question écrite de Mme Emma WIESNER - Commission européenne

Question de Mme Emma WIESNER,

Diffusée le 6 juillet 2021

Subject: How will the Commission correct the mistake of punishing industries that are curbing their emissions?

Europe’s emissions trading system is the EU’s most important tool in fighting climate change and in making sure that the ‘polluter pays’ principle is upheld. When it was introduced, however, the system needed to be phased in, and it was decided that emissions allowances could be allocated freely. This does not only mean that the important principle is not being upheld: major imbalances are also being created in the system.

Most industries in Sweden are observing that factories that did their homework and converted in order to reduce their emissions are being disadvantaged by the system. The most recent example is that of Arctic Paper in Glycksbro, a company which has invested and cut its emissions, but has now been dealt a blow by being thrown out of emissions trading. As a result, it has lost the free allocation of emissions allowances and is therefore SEK 130 billion worse off than it would be had it not invested and converted. It is not fair that those that have led from the front and set an example are being disadvantaged in this way. The current system is therefore preventing the industry from converting.

What is the Commission going to do to correct this mistake, both within the existing trading system that is already proving disadvantageous to factories, and within the forthcoming trading system that the Commission is currently working on?

Réponse - Commission européenne

Diffusée le 12 septembre 2021

Answer given by Executive Vice-President Timmermans on behalf of the European Commission (13 September 2021)

Under the EU Emissions Trading System (ETS) free allocation is granted based on benchmarks representing the average emissions of the 10% best installations in the system in each sector.

Emissions resulting from the combustion of sustainable biomass are zero-rated. Operators reducing their emissions face lower carbon costs per unit of product than those having high emissions and have an advantage. This includes incentives to use sustainable biomass.

In the specific case mentioned, the installation has reported no emissions for some years due to the exclusive use of biomass for meeting their heat needs and thus has not incurred any carbon costs. Nevertheless, it still benefitted from free allocation of emission allowances until 2020.

In line with the provisions of the ETS Directive (1) clearly excluding installations using exclusively biomass from its scope, for the current allocation period (2021‐2025) the installation has been excluded from the system and will not receive free allowances, as it exclusively used biomass in all years of the relevant baseline period (2014‐2018).

In the recent Commission proposal for the ETS revision (2) the benchmarks become more stringent, giving even stronger incentives to companies to decarbonise.

The Commission proposal also includes a significant reinforcement of the Innovation Fund to support the uptake of innovative low- carbon technologies and processes in energy-intensive industries, including products substituting carbon-intensive ones, renewable energy generation, energy storage, carbon capture and storage (CCS) and carbon capture and utilisation (CCU) in industry.

⋅1∙ Directive 2003/87/EC of the European Parliament amending Directive establishing a scheme for greenhouse gas emission allowances trading within the Community.

OJ L 275, 25.10.2003, p. 32.

⋅2∙ COM/2021/551 final.

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