Ahead of the European Council on 19–20 March, we’ve joined a coalition of 35 civil society organisations urging EU leaders to safeguard the EU Emissions Trading System.
About the letter
Ahead of the 19-20 March European Council, a group of 35 civil society organisations is calling on EU leaders to protect the integrity and predictability of the EU Emissions Trading System (EU ETS).
At a time of geopolitical instability and economic realignment, policy certainty is essential. European industry requires stable and predictable carbon pricing to move ahead with capital-intensive low-carbon investments. This call for stability is not limited to civil society. Recent industry communications – including a WindEurope-coordinated joint statement and a letter from Nordic business federations – underline that weakening the EU ETS would increase regulatory risk and financing costs, delay final investment decisions and weaken Europe’s attractiveness for long-term industrial projects. The EU ETS has already been carefully calibrated to account for competitiveness concerns, including through extensive free allocation and built-in stability mechanisms that have shielded economic actors from the full societal cost of CO2 emissions.
The EU ETS is not responsible for the EU’s loss of industrial competitiveness. Up until now, it has given free permits to industry, so its effective cost to industry has sometimes even been negative. In addition, industrial electricity users are generously compensated for the indirect carbon costs they pay through power bills.
Our demands:
- Uphold Europe’s position as a global leader on climate policy and provide clear political backing for a strong, predictable and rules-based carbon pricing framework insulated from short-term political intervention;
- Allow the European Commission to present its forthcoming EU ETS review, to be addressed through the ordinary legislative process, with Member States fully exercising their role within the Council;
- Maintain the agreed cap trajectory in line with the legally mandated 2030 and 2040 climate targets and safeguard the integrity of the Market Stability Reserve;
- Incentivise low-carbon production by phasing out free allocation to polluting products, including through extending the CBAM;
- Strategically deploy ETS auction revenues and the Innovation Fund to support the scaling up of products and processes that do not benefit from free allocation or CBAM protection, electrification, circularity, renewable energy and innovation while avoiding fossil-based lock-in.
Related publications
More on the EU ETS
State Aid for Indirect Carbon Costs: Reform before extending!
Sandbag responds to the EU’s consultation on State aid for Indirect Carbon Costs (ICC), calling for targeted reforms to better support clean electricity, avoid windfall profits, and align with the Carbon Border Adjustment Mechanism (CBAM).
Simulating CDR in the EU ETS: The Risks of Premature Integration
Sandbag has developed an ‘ETS + CDR simulator’ to help visualise and explore the impact that CDR integration could have on the ETS, assess the demand it could create for CDR, and highlight the potential consequences of this demand. This report uses the simulator to explore how different integration pathways could affect emissions reductions, carbon prices, and potentially lead to negative externalities.
The EU ETS at a Crossroads
Sandbag’s latest submission to the EU ETS and Innovation Fund consultation calls for clearer rules on free allocation, stronger criteria for funding innovation, and safeguards against misleading carbon accounting practices.
