As alternative facts fly around the European institutions as the ETS reform process comes to a close, Sandbag looks at the truth on what the ETS reform might mean for industry. We focus especially on the cement, steel and ceramics sectors.
Unless the ETS can be dragged away from death’s door, cutting EU emissions will come at greater cost and with distortions across the single market, or may not happen at all. The EU can not afford to be left behind as the rest of the world introduces carbon pricing and builds modern, low-carbon industry.
What can resuscitate the ETS now?
• The ENVI proposal alone is a very modest increase in ambition, and analysts suggest it will have little impact on the market or the carbon price.
• Only re-basing the 2021 cap at the real level of 2020 emissions, in addition to the ENVI proposal, can fix the ETS.
• Replacement of free allocation with border adjustment measures will end windfall profits to industry from the ETS, and unlock much needed investment in low-carbon innovation in Europe.