PIK Director Ottmar Edenhofer on the reform of the EU Emissions Trading System

According to the Commision proposal, the allocation of new emission allowances will be phased out more gradually than previously planned; there will be a longer period of free allocation for firms facing particularly fierce global competition. This is balanced by new investment conditionalities designed to accelerate industrial decarbonisation. There are also new credits for firms that remove CO₂ from the atmosphere.

PIK Director Ottmar Edenhofer comments:

“With its proposal, the Commission is responding to the altered global economic and geopolitical situation. European industry needs greater flexibility when it comes to climate action – but it also needs a reliable framework that promotes investment and does not put pioneers at a disadvantage. The additional flexibility does not alter the EU’s overall climate policy course. Rather, the reform provides clarity on the contribution that the emissions trading is intended to make towards the 2040 climate target.”

 “Opening up emissions trading to permanent carbon dioxide removals from the atmosphere is an important step. For the first time, it creates a credible and long-term investment framework for carbon removal technologies in Europe. Simultaneously, negative emissions offer a way to compensate for industrial emissions that are difficult to avoid. Emissions trading is thus consistently aligned with climate neutrality.”

“The Commission is deliberately taking a cautious approach to the question of integrating international credits – provided for in the Paris Agreement to account for climate protection efforts outside the EU – into the EU Emissions Trading System. This is understandable in light of past experience. However, Europe should keep a close eye on this option. If designed wisely, emissions trading could become the starting point for a new generation of high-quality climate partnerships, strengthening European climate policy geopolitically.”

 “With this proposal, the Commission has set the course for emissions trading up to 2040. Political negotiators must now decide how it will be implemented: the European Parliament and the Council must agree on a reliable framework that signals industry to move forward and promotes investment in climate neutrality. Member states, in turn, are called upon to create the conditions for industrial transition, for example through infrastructure expansion and competitive electricity prices.”