Schneider: "A robust emissions trading system is the foundation for prosperity, climate action and competitiveness in Europe"
The European Commission presented its proposals to further develop the European Union Emissions Trading System (EU ETS). The reform is intended to strengthen emissions trading as the European Union’s key climate instrument and align it with the European 2040 climate target and the goal of climate neutrality in Europe no later than 2050. At the same time, it will provide greater flexibility for Europe’s industrial transition.
Federal Environment Minister Carsten Schneider commented:
"The EU Emissions Trading System has proven to be effective. Since it was introduced, emissions from the sectors it covers have fallen by more than half, while our economic output has increased significantly over the same period. The proposals reaffirm that emissions trading remains at the core of European climate policy and is the most important market-based driver of investment in climate-friendly technologies. At the same time, the reform is intended to provide businesses with greater planning certainty while boosting Europe’s competitiveness as an industrial hub by introducing targeted flexibility. It is important that the companies that have already started down this road are not penalised now. This strikes the right balance between ambitious climate action and a successful industrial transition."
The Federal Environment Ministry welcomes the European Commission’s commitment to further developing emissions trading as a reliable, long-term policy instrument. A clear emissions pathway through to 2040 will give companies investment certainty and predictability and reinforce the credibility of Europe’s climate targets. The German government committed early on to a transparent, reliable path forward. The reform also improves planning and legal certainty, which are necessary to achieve Germany’s target of climate neutrality by 2045 at the latest.
The Federal Environment Ministry is also pleased that emissions trading will create stronger incentives for investments. The proposed "investment booster" is therefore an important step in the right direction. It sends a signal to businesses that now is the time to invest in sustainable decarbonisation projects. Considering how rapidly other countries are currently electrifying and decarbonising their industrial production, climate action is becoming more and more important to ensure the competitiveness of German and European companies.
The Federal Environment Ministry also welcomes future flexibility mechanisms, such as the recognition of permanent CO2 removals and a strengthened Market Stability Reserve (MSR). International credits could also serve as a useful addition to EU emissions trading from 2036 onwards. These flexibilities provide some breathing room should emissions reductions within Europe prove to be particularly technically challenging or very costly in certain sectors. This will enable companies to successfully navigate their transition.
The Federal Environment Ministry also supports the proposed changes to the "fallback benchmarks" for free allocation. This will give companies facing particularly challenging transition processes more flexibility. Energy-intensive industries in particular – for example, the chemical, steel and raw materials sectors – face a dual challenge: restructuring production for climate neutrality while maintaining their position against fierce international competition. The proposed changes account for the fact that companies transition at different speeds while simultaneously underscoring the European climate targets.
Carsten Schneider emphasised:
"Not every industry can move towards climate neutrality at the same pace. Energy-intensive sectors in particular face enormous technological and economic challenges. That is why we need emissions trading that combines ambitious climate targets with sufficient flexibility. At the same time, we will work to ensure that any new investment funds have a direct and tangible impact on companies. Climate action and competitiveness are not mutually exclusive – they are mutually dependent. “It is precisely this balance that the reform proposals seek to achieve."
The German government will now review the European Commission’s proposals in detail and, in the upcoming negotiations at European level, work to ensure that emissions trading is further developed as a flexible, reliable and economically efficient climate instrument. At the same time, we will engage in dialogue with the sectors and trade unions affected, particularly with regard to effective protection against carbon leakage and sufficient investment incentives for green technologies.