The European Commission wants to organize three meetings during the upcoming summer with stakeholders of key industry groups in order to find out whether the free allocation of carbon permissions to major polluters ought to carry on after 2020 when the current rules expire.
The decision of the Commission to organize such meetings follows the last month’s failure of EU leaders to come up with an agreement on EU28’s 2030 climate and energy targets. Instead of agreeing on something, the Commission has set up an October deadline amidst controversy whether to strengthen the plan ahead of global negotiations on the climate change and the environment. The official statement on the Commission’s website says that the outcomes of the consultations “will provide input to the European Council’s October 22-23 discussions on the 2030 climate and energy framework”.
At the beginning of this year, Brussels proposed establishing an EU-wide greenhouse gas reduction target of 40 percent below 1990 levels by 2030, which deepened the current 2020 goal of a 20 percent cut. The goals would decrease the cap on emissions for more than 13,000 firms under the Emissions Trading System (ETS), which regulates approximately half of the union’s greenhouse gas production. Moreover, it makes it obligatory for companies to hold one permit for every tone of carbon they produce.
Currently, Brussels does not regulate carbon permits for energy intensive industries such as Arcelor Mittal or BASF although they receive the vast majority of carbon permits under the ETS. These businesses say that competition from countries without environment-friendly regulations could otherwise make them less competitive and thus force them to relocate abroad. The EU’s plan was therefore to have 2030 environmental goals address this issue by becoming an “improved and better focused” free allocation system that would continue after 2020 unless other countries came up with comparable measures.
The planned summer meetings should consult business and industry stakeholders on whether the current system provides adequate safeguards against carbon leakage and whether free allocation influences incentives to cut emissions and innovate. Among other topics, leaders will also discuss the trajectory of decreasing importance of free allowances in the post-2020 system and the impact of measuring and monitoring of climate policy on industrial competitiveness.
