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Newsletter - December 2022
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What a year! As climate change climbed up the EU political agenda with the start of the legislative process on a dozen pieces of legislation to implement a commitment to 55% emission reductions by 2030, rocketing commodity prices triggered a surge in coal burn in Europe, energy security concerns caused by Russia’s invasion of Ukraine stole priority from climate change and unilateral policy initiatives inside and outside Europe, such as the US Inflation Reduction Act, sowed doubts in the continent’s ability to retain and decarbonise its industry.
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As the revisions of the EU’s carbon market and creation of a carbon border adjustment mechanism (CBAM) are set to reach their final act this weekend, here’s our 2022 holiday wishlist:
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Please find below some of our recent work.
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You can read all of our publications on our website here.
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Reports & Policy Briefs
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Currently, most EU-managed climate innovation subsidies go to innovation. The EU’s Innovation Fund, launched in 2020, is one of the world’s largest programmes funding innovative low-carbon technologies, however the current approach is too costly and inefficient.
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The proposed Cross-Border Adjustment Mechanism (CBAM) will charge a fee based on the carbon content of some industrial products imported into the EU (listed in Annex I of the regulation), but that may not be applicable to all the embedded emissions of these products.
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As mentioned in the Official Journal of the EU, more than one third of ships sent to these beaches each year are owned by European companies. Beyond the environmental and human impact, this trade flow contributes to an important problem for the European steel industry; a large quantity of raw materials is exported instead of being recycled on the continent.
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We welcome immediate action to reduce Europe’s dependency on Russian fossil fuels in the face of its aggression against Ukraine. However, the European Commission’s proposal reflects the impossibility of meeting this objective while keeping conflicting incentives in force.
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This report aims at highlighting the role circularity can have in the fast decarbonization of the steel sector. How can European industrial and climate policy accelerate this transition?
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Sandbag welcomes the opportunity offered by the European Commission to provide feedback on the draft Delegated Act defining a method for assessing greenhouse gas emission savings for certain fuels. However, we are concerned that, despite the commendable intention to take into account many parameters, the methodology creates a number of perverse incentives.
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Achieving the increased EU climate targets and the goals of the Paris Agreement requires strong incentives to be set for the economy to decarbonise. A significant part of the EU’s carbon emissions is found in the industrial sectors. Consequently, a more robust regulatory framework is required to drive deep decarbonisation and put the EU on the path to a carbon neutral economy.
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This brief gives an analysis of the EU ETS Revenues, and aims to highlight, under various scenarios, how much is allocated to industry, Member States, and the Union’s budget respectively. The European carbon market, currently under review, will likely generate emission allowances worth over a trillion euros over 10 years, which is more than the EU’s entire recovery budget.
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Blog Posts
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A Carbon Border Adjustment Mechanism (CBAM) has been proposed by the European Commission as an alternative to the measures under the EU ETS that currently address the risk of carbon-intensive industries relocating to countries with no carbon pricing (carbon leakage), such as the free allocation of emission allowances. Free allocation creates obstacles to decarbonisation, to innovation and to the good functioning of the carbon market. This is why it is urgent to replace this mechanism with the CBAM.
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Earlier this month, the IF’s third large-scale call was announced, with a bumper budget of €3bn. The EU’s Innovation Fund, launched in 2020, is one of the world’s largest programmes funding innovative low-carbon technologies. The fund can cover up to 60% of a project’s costs, mostly upfront with few strings attached.
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The reform of the European carbon market (ETS, for Emissions Trading Scheme) and related Carbon Border Adjustment Mechanism (CBAM) will define the future of the circular economy for years to come.
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As energy prices hit record levels, the European Union’s carbon emissions permits – which hit €100 on futures markets in February – have been accused of making electricity too expensive, and although natural gas has a much larger responsibility, the carbon price also plays a role.
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The EU is in the process of reforming its carbon market (EU ETS) in line with raising the bloc’s emission reduction target up to 55%, from 40% currently. Amongst the many features of the reform, one is raising little attention, despite contradicting a higher ambition: a proposed increase in the number of surplus allowances in the system. But if the EU is serious with meeting its cap, the surplus should and could be reduced down to zero during this decade.
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This analysis is based on estimations using data available as of 4 April 2022. It will be updated as more data is made available during the coming weeks. The European Commission has released the bulk of its data on reported emissions from EU ETS sectors for the year 2021. Emissions from stationary installations in 2021 were 1,344 MT, an increase of 7.3% compared to 2020, and 14% below the ETS cap, according to estimates from Sandbag.
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If you would like more information on any of these topics, or to speak with a member of the Sandbag team, please send us an e-mail at contact@sandbag.be
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Sandbag is a non-profit climate change think tank which uses data analysis to build evidence-based climate policy. We focus on EU policies such as the EU Emissions Trading Scheme and climate governance, and emissions reductions in industrial sectors.
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Want to support Sandbag in the fight against climate change?
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