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Decarbonising EU power and industrial sectors

The European Union has a number of instruments in its decarbonisation policy toolkit, including its Emissions Trading System (EU ETS) and the Industrial Emissions Directive (IED).

Emissions Trading System

Established in 2005, the European Union’s Emissions Trading System covers some 10,000 industrial installations in the energy and manufacturing sectors, together representing about two fifths of the EU’s carbon footprint. 

The EU ETS is what is known as a cap-and-trade system. This means that it imposes a declining ceiling on total emissions but allows companies covered by the system to trade their emissions allowances among themselves.

Historically, the EU ETS suffered from a surplus of pollution permits, low carbon prices and an excessive supply of allowances handed to heavy industry free of charge. While the reformed EU ETS has tackled some of these issues, it continues to give away too many freebies. The revamped EU ETS will be expanded to cover road transport and buildings from 2027, with carbon pricing levied on fuels used within our homes and vehicles. As citizens will be expected to pay for their pollution, it’s time that industrial emitters pay their fair share.

Industrial Emissions Directive

Since 2010, the Industrial Emissions Directive (IED) has striven to rein in manufacturing-related emissions in the EU by implementing what are known best available technologies. The IED is the main legal instrument regulating pollution from industrial installations. It regulates pollution from around 50,000 large industrial installations in Europe, which emit 736 million tonnes of CO2 or about 40% of the bloc’s total carbon footprint.

Despite its aim of limiting industrial emissions, the IED is riddled with omissions and exemptions.Although it helps to reduce air pollution and protect the environment, the IED suffers one devastating blindspot: it does not deal with climate-warming  greenhouse gases. 

What is CMW doing about it?

When it comes to the EU ETS and IED, Carbon Market Watch focuses on:

  • Observing policy developments and negotiations related to the two policy instruments
  • Researching and presenting recommendations for making the EU ETS and CBAM more effective
  • Investigating and reporting on EU ETS and CBAM implementation 

“The EU ETS and the IED can help the European Union speed up its decarbonisation goals, achieve its climate targets and ensure that nobody is left behind. But to realise this potential requires urgent and substantial reform. “

Eleanor Scott

Expert on EU carbon markets

“The EU ETS and the IED can help the European Union speed up its decarbonisation goals, achieve its climate targets and ensure that nobody is left behind. But to realise this potential requires urgent and substantial reform. “

Eleanor Scott

Expert on EU carbon markets

What changes is CMW demanding?

Eliminating free pollution permits from the EU ETS

Strengthening social protections under the EU ETS

Ensuring direct emission reduction is preferred to offsetting

Expanding the IED to cover greenhouse gas emissions

Latest

BAH, HUMBUG! END €TS FREEBIES. MAKE POLLUTERS PAY FOR A FAIR AND CLEAN TRANSFORMATION

EU ETS key policy and advocacy milestones

This timeline of future EU Emissions Trading System (EU ETS) policy milestones is useful for civil society organisations and activists to identify moments for advocacy activities.

Highlighted

In 2022 alone, a staggering €47.6 billion in ETS revenues was foregone in the form of free allowances. It's time for industry to pay in full for their emissions and for ETS revenue to be spent where it is needed most

Contact our experts

Sam Van den plas
Policy Director

sam.vandenplas[at]carbonmarketwatch.org

Lidia Tamellini
Expert on EU Industrial Decarbonisation

lidia.tamellini[at]carbonmarketwatch.org

Eleanor Scott
Expert on EU Carbon Markets

eleanor.scott[at]carbonmarketwatch.org

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