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ETS to ESR: Too much flexibility

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ETS to ESR: Too much flexibility

ESR too much flexibilityThis briefing explains how the one-off flexibility between the Effort Sharing Regulation and the EU ETS reverts the progress made during the ETS trilogues, and could lead to an increase of the total EU emission budget of up to 200 million tonnes, due to the interactions with the MSR:

  • Worst case, the one-off flexibility would cause the MSR to lose one year of double withdrawal. In that case, the total EU emission budget for 2021-2030 would increase by about 200 million tonnes. In other words, the one-off flexibility could revert the welcome improvements to the MSR as agreed last month.
  • Even if this worst case does not materialize, it’s still certain that member states would be able to use ETS allowances under the ESR which would have otherwise been absorbed and subsequently cancelled by the MSR. Under Sandbag’s low case emission scenario, the one-off flexibility would lead to an increase in the ESR budget of 100 million tonnes, and only a 61 million tonne decrease in the ETS budget. The net impact would be an increase in the total budget of 39 million tonnes.

This goes directly against both the agreement of a strengthened MSR as reached last month, as well as against the European Council conclusions from October 2014 (which stated that the environmental integrity should be preserved when developing the one-off flexibility mechanism).

The European Parliament has put forward a solution (Amendment 48) that prevents any undesired interaction between the one-off flexibility and the MSR. According to Sandbag’s analysis, it effectively guarantees a net-zero impact of the one-off flexibility on the EU’s emission budget. The Council should accept this amendment as a strict minimum to ensure at least some notion of preserving the environmental integrity.

 

Image with thanks to Ken Treloar