The European Commission proposes to extend free ETS benefits for CBAM sectors until 2038, EUROFER expresses concern
The European Commission has announced that it has submitted a proposal to review the EU's Emissions trading System (ETS), along with a new electrification action plan aimed at accelerating industrial decarbonization, increasing Europe's competitiveness and making the EU the world's first electricity-powered continent.
The Commission said that although about 70 percent of electricity in the EU is currently generated from domestic clean energy sources, the level of electrification of final energy demand has remained at 23 percent over the past decade. Thus, an estimated electrification target of 46 percent by 2040 will be estimated as part of the Energy Union's post-2030 package of measures. Achieving this goal could reduce the EU's annual cost of fossil fuel imports by 260 billion euros by 2040, while improving energy security, reducing energy costs and increasing industrial competitiveness.
European Commission President Ursula von der Leyen said that in order to reduce Europe's dependence on fossil fuel imports, it is necessary to accelerate the use of electricity generated from domestic environmentally friendly energy sources. She added that the proposed measures are aimed at reducing electricity prices, adapting the EU carbon market to changing global conditions, supporting industrial decarbonization and strengthening Europe's energy independence.
The Commission proposes to make changes to the ETS system
As part of the ETS review, the Commission proposed updating the linear reduction factor (LRF) to 3.7 percent for the period 2031-35 and 1.7 percent for the period 2036-40, creating a more gradual path to reduce emissions while maintaining compliance with EU climate legislation. The proposal will also allow for the use of up to two percent of high-quality international carbon credits over the period 2036-2040 to support decarbonization projects abroad and provide additional flexibility as domestic emissions reductions become increasingly difficult.
The Commission also proposed to expand financial support to the industry.l Decarbonization. The Industrial Decarbonization Bank will receive 100 billion euros to finance large-scale industrial decarbonization projects across Europe, and the ETS investment program will be available until 2030 as the first stage of the bank's implementation. The ETS Innovation Fund will continue to support the commercialization of innovative low-carbon technologies, and member states will be required to allocate 50 percent of their national ETS revenues to decarbonization.