WEMO24-Compiled Report-Interactive compressed (002) 4154-7882-8116 v.1 - Flipbook - Page 28
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A limitation on these high prices is that, at the end of the day,
industrial companies will pass their extra costs to their end
customer by increasing the price of their goods endangering
customers and citizens acceptance of the energy transition.
As a conclusion, carbon emissions rights allocations systems
associated with emissions trading systems are a good way to
incentivize Companies to invest in decarbonization projects.
However, they should have a much larger coverage both on
sectors and geographies and the emission prices should
be higher.
WEMO 2024
115 https://www.homaio.com/post/eu-ets-revenues-what-do-the-member-states-use-theproceeds-for#:~:text=The%20rules%20on%20EU%20ETS%20revenues%20use,-The%20
European%20Law&text=Yet%2C%20most%20countries%20are%20using,for%20climate%20
and%20energy%20purposes.
116 https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets/
scope-eu-emissions-trading-system_en
EU ETS prices have been decreasing from a maximum of €100/t
to €70/t (in August 2024).
On October 1st, 2023, the Carbon Border Adjustment Mechanism
(CBAM) a tool to fight carbon leakage117 entered into application
in the EU for a transitional phase until 2026. In this phase, CBAM
will only apply to a limited number of goods imports: cement,
iron and steel, aluminium, fertilisers, electricity and hydrogen.
EU importers of those goods will have to report on the volume
of their imports and the greenhouse gas (GHG) emissions
embedded during their production, but without paying any
financial adjustment. As of 2026, importers will need to buy and
surrender the number of “CBAM certificates” corresponding to
the GHGs embedded in imported CBAM goods.
It is much too early to assess the effectiveness of this very
complex innovative tool.
117 The phenomenon where industries relocate their operations to regions with less stringent
emissions regulations, potentially increasing global emissions.
28
In addition, in some large emitting countries, such as India
(the third largest emitter), there is no system in place, and in
China (the largest emitting country), the present system is on
a voluntary basis.
Set up in 2005, the EU ETS is the world's first international
emissions trading system. It covers greenhouse gas emissions
from around 10,000 installations in the energy sector and
manufacturing industry as well as aircraft operators.
From 2024, it also covers emissions from maritime transport
and incineration of municipal waste
In 2022 in Europe, 90% of the auctioning revenues(€30bn)
were redistributed to member states. The remaining 10% of
the proceeds go to the innovation fund and the modernisation
fund. Member state spent only an average of 76% of these
revenues for climate and energy purposes in a vast range of
programs.115
As part of the 2023 revisions of the ETS Directive, a new emissions
trading system named ETS2 was created.116 It will cover new
sectors mainly from fuel combustion in buildings, road transport
and additional sectors and become fully operational in 2027.
Although it will be a ‘cap and trade’ system like the existing EU
ETS, it will cover upstream emissions. The ETS2 cap will be set to
bring emissions down by 42% by 2030 compared to 2005 levels.
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