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Directive 2018/410 amending the rules of the European Union Emissions Trading System (EU ETS) for the next period, 2021-2030, published

04 April 2018 | Markets

On the 19th of March, the Official Journal of the European Union published Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018 amending Directive 2003/87/EC to intensify emission reductions in a cost-effective manner and facilitate investment in low-carbon technologies, as well as Decision (EU) 2015/1814 on the market stability reserve. Its entry into force will be on 8 April.

This amendment of the Directive is a continuation of the EU Emissions Trading System (EU ETS) as the main European instrument for achieving the European target of reducing GHG emissions by at least 40% from 1990 levels by 2030. However, it defines a reformed system, accompanied by an instrument for market stability ("the market stability reserve") and a linear reduction factor of 2.2% in the quantity of allowances issued each year across the EU (compared to 1.74% in the previous period).

The reform of the EU ETS undoubtedly focuses on free allocation. Although this does not disappear for industrial installations, new requirements are established for the revision to be made of the reference values (benchmark) on which the allocation for the next period will be articulated, considering improved values with respect to the real improvement rates of each sector. In other words, additional adjustment factors could be applied to the discounted values obtained for the most efficient 10% of each reference value, so that the new values would be included in a reduction in the ratio of emissions per reference unit of between 0.2 and 1.6% per year compared to 2008.

A much more dynamic system is also proposed to correct the annual free allocation to take account of increases and decreases in production. Compared to the previous threshold of 50% of the historical level of activity to adjust the free allocation, the new threshold is set at 15% and is assessed based on a two-year moving average.

Other novelties brought about by the amendment of the Directive are the possibility for Member States to exclude installations emitting less than 2,500 tCO2 without the need to propose equivalent measures or the definition of an open path to the articulation of a system agreed at the aviation sector level.

Undoubtedly, this publication of the amendment of the EU ETS Directive is the starting signal for the long-distance race that awaits us until the beginning of the next period (transposition of the rule into the legal system of each country, publication of the free allocation rules, etc.).

 

https://www.wearefactor.com/docs/Directiva2018_410_en.pdf

 

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Iria Flavia Peñalva

ipenalva@iamfactor.com

Source: Factor