- The EU ETS at a Crossroads

Read our EU ETS response

Read our Innovation Fund response

Our main messages:

Simplify the EU ETS by phasing out free allocation
Aviation: put a seat belt on EUA supply
Free allocation: switch from process to products
Link indirect cost compensation to carbon-free electricity only
Reform the Innovation Fund to:
– Better assess the carbon footprint of electricity use
– Reserve grants to technology risk
– Reserve scale-up subsidies to poorly capitalised sectors
Market Stability Reserve: reduce the reinjection rate as well as thresholds
Keep carbon removals out of the ETS
Do not shift CCU carbon accounting down value chains
Limit linking with other ETS

Read our responses on the European Commission’s website:

On the EU ETS

On the Innovation Fund

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In 2021, over 14 million gross tonnes of ships were dismantled, with a third owned by European firms and largely scrapped in South Asia. This practice exports high-quality scrap steel that could otherwise support low-carbon steelmaking in Europe. However, EU carbon market rules currently favour carbon-intensive blast furnaces over cleaner electric arc furnaces (EAFs) by allocating more free emissions allowances to the former. This distorts incentives, discouraging investment in greener technologies. Sandbag calls for a faster phase-out of free allowances and a more comprehensive CBAM to promote domestic recycling and decarbonisation.