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
European Scrap Steel Floats Away Under Carbon Market Incentives
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.
RePowerEU financing plan shows how market makes decarbonisation harder
Read Sandbag’s feedback to RePowerEU on the European Commission’s website. We welcome immediate...
RePowerEU: Fiddling with the Carbon Market puts the Climate at Risk
[See new analysis with EC, EP and Council proposals] The European Commission’s plan to raise...
