Directive (EU) 2023/959 amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union and Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading system

Summary:

Directive (EU) 2023/959 - adopted by the co-legislators on 10 May 2023 - introducing amendments to Directive 2003/87/EC and Decision (EU) 2015/1814. This a text with EEA relevance.

Further information:

The Communication setting out the European Green Deal from December 2019 introduced a new growth strategy for the European Union (EU). It reaffirmed the European Commission's ambition to increase its climate targets and achieve climate neutrality by 2050. These targets were further updated in September 2020 in the Climate Target Plan, which became legally binding with the European Climate Law. The Fit for 55 legislative package was the result of the review carried out by the Commission on the EU's climate and energy legislation in view of the targets adopted in the meantime.

The EU Emissions Trading System (EU ETS) was established by Directive 2003/87/EC and the existing framework was last revised in 2018. An assessment later carried out by the Commission showed that an unchanged framework would not be able to deliver on the most recent targets set out by the EU. This Directive reviews the legislative framework to ensure the latest climate ambition is met. In particular, it intends to:

• ensure continued effective protection for the sectors exposed to a significant risk of carbon leakage and incentive the uptake of low-carbon technologies;
• address the distributional and social effects of this transition;
• ensure that sectors not included in the EU ETS contribute cost-effectively to the emission reductions;
• review the monitoring, reporting and verification system of CO2 emissions from maritime transport;
• review the Market Stability Reserve (MSR) in line with the corresponding legal obligation.

Amendments to Decision (EU) 2015/1814 establishing the Market Stability Reserve (MSR) address the specific objectives of this Act.

The draft law was adopted by the European Commission on 14 July 2021, as part of the Fit for 55 legislative package. Following a first rejection of the draft report, the plenary of the European Parliament adopted a negotiating position on 22 June 2022. The Council of the European Union adopted a general approach on 29 June. An informal agreement between the co-legislators on a compromise text for this file was reached on 18 December. This was formally endorsed by the Parliament on 18 April 2023 and by the Council on 25 April. The Act was signed by the co-legislators on 10 May 2023 and published in the Official Journal on 16 May 2023.

• Primary Source

Commentary and Analysis

Euronews, 16/07/2021: Why is the EU's new Emissions Trading System so controversial? https://www.euronews.com/my-europe/2021/07/16/why-is-the-eu-s-new-emissions-trading-system-so-controversial

Linklaters: Sustainable Futures, 29/07/2021: EU “Fit for 55” package: changes to EU Emissions Trading System – putting a price on carbon https://sustainablefutures.linklaters.com/post/102h43u/eu-fit-for-55-package-changes-to-eu-emissions-trading-system-putting-a-price

International Institute for Sustainable Development (IISD): Commentary, 05/10/2021: Strengthening EU Emissions Trading Scheme to Back up Climate Ambitions https://sdg.iisd.org/commentary/guest-articles/strengthening-eu-emissions-trading-scheme-to-back-up-climate-ambitions/

European Ceramic Industry Association: Topics, 08/11/2021: Ceramic industry position on the EU ETS review https://cerameunie.eu/topics/climate-energy/emissions-trading-system/ceramic-industry-position-the-eu-ets-review/

European Chemical Industry Council (CEFIC): Policy Matters, 10/11/2021: CEFIC position on the ETS review https://cefic.org/app/uploads/2021/11/Cefic-Position-ETS-review-Final.pdf

European Automobile Manufacturers’ Association (ACEA): Publications, 02/12/2021: Position paper – EU Emissions Trading System (ETS) for road transport https://www.acea.auto/publication/position-paper-eu-emissions-trading-system-ets-for-road-transport/

RICS: World Built Environment Forum: Megatrends, 13/12/2021: The EU Emissions Trading System for buildings: a help or a hindrance? https://www.rics.org/uk/wbef/megatrends/markets-geopolitics/the-eu-emissions-trading-system-for-buildings-a-help-or-a-hindrance/

Atlantic Council: EnergySource Blog, 23/12/2021: Expanding the ETS to cover the road transport and building sectors would leave many Europeans behind https://www.atlanticcouncil.org/blogs/energysource/expanding-the-ets-to-cover-the-road-transport-and-building-sectors-would-leave-many-europeans-behind/

European Parliamentary Research Service (EPRS): Briefing, 27/01/2022: ‘Fit for 55’: Revision of the EU Emissions Trading System - Initial Appraisal of a European Commission Impact Assessment https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2022)699470

Climate Action Network (CAN Europe): Open Letter, 14/04/2022: Time to vote for an EU Emissions Trading System (ETS) that works for climate and industrial transformation https://caneurope.org/letter-time-to-vote-for-an-emissions-trading-system-that-works-for-climate-and-industrial-transformation/

FIA: Market Voice, 06/05/2022: Market experts push back on proposed EU ETS restrictions https://www.fia.org/marketvoice/articles/market-experts-push-back-proposed-eu-ets-restrictions

S&P Global: Commodity Insights, 08/06/2022: EU Parliament rejects proposed carbon market reforms https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/energy-transition/060822-eu-parliament-rejects-proposed-carbon-market-reforms

Ernst&Young (EY): Tax Alerts, 13/06/2022: European Parliament rejects carbon legislation package, including more ambitious rules for EU Emission Trading System and new EU Carbon Border Adjustment Mechanism https://www.ey.com/en_gl/tax-alerts/european-parliament-rejects-carbon-legislation-package-including-more-ambitious-rules-for-eu-emission-trading-system-and-new-eu-carbon-border-adjustment-mechanism

European Parliamentary Research Service (EPRS): At a Glance, 20/06/2022: Review of the EU ETS: Fit for 55 https://www.europarl.europa.eu/thinktank/en/document/EPRS_ATA(2022)729455

EurActiv: Opinion, 04/11/2022: A structural reform of the ETS to enhance price predictability is needed https://www.euractiv.com/section/energy-environment/opinion/a-structural-reform-of-the-ets-to-enhance-price-predictability-is-needed/

Carbon Market Watch, 18/12/2022: Final deal on EU carbon market (ETS) gives heavy industry a free pass at the expense of households and taxpayers https://carbonmarketwatch.org/2022/12/18/final-deal-on-eu-carbon-market-ets-gives-heavy-industry-a-free-pass-at-the-expense-of-households-and-taxpayers/

European Parliamentary Research Service (EPRS): Briefing, 21/02/2023: Review of the EU ETS: 'Fit for 55' package https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2022)698890

European Parliamentary Research Service (EPRS): At a Glance, 12/04/2023: Review of the EU ETS: Fit for 55 https://www.europarl.europa.eu/thinktank/en/document/EPRS_ATA(2023)745714

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News

EurActiv, 22/10/2021: Eastern countries win carbon market ‘study’ at EU summit https://www.euractiv.com/section/climate-environment/news/eastern-countries-win-carbon-market-study-at-eu-summit/

Reuters, 08/06/2022: Risk of delay to carbon market reforms after surprise EU vote https://www.reuters.com/business/environment/eu-lawmakers-reject-carbon-market-reforms-divisive-climate-vote-2022-06-08/

EurActiv, 08/06/2022: Divided Parliament votes down EU carbon market reform https://www.euractiv.com/section/energy-environment/news/divided-parliament-votes-down-eu-carbon-market-reform/

Euronews, 08/06/2022: Chaos erupts at the European Parliament as three key climate laws are postponed https://www.euronews.com/my-europe/2022/06/08/chaos-erupts-at-the-european-parliament-as-three-key-climate-laws-are-postponed

Le Monde, 09/06/2022: EU Parliament rejects key reform to achieve carbon neutrality https://www.lemonde.fr/en/environment/article/2022/06/09/european-parliament-rejects-key-reform-to-achieve-carbon-neutrality_5986167_114.html

Politico, 09/06/2022: Key climate proposals fail to pass European Parliament https://www.politico.eu/article/key-climate-proposals-fail-to-pass-european-parliament/

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Official

EUR-LEX: COM(2021)551: Proposal for a Directive amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union, Decision (EU) 2015/1814 concerning the establishment and operation of a market stability reserve for the Union greenhouse gas emission trading scheme and Regulation (EU) 2015/757 https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=COM:2021:551:FIN

EUR-LEX: SWD(2021)557: Staff Working Document accompanying the Proposal - Subsidiarity Grid https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2021:557:FIN

EUR-LEX: SWD(2021)601: Staff Working Document accompanying the Proposal - Impact Assessment Report https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2021:601:FIN

EUR-LEX: SWD(2021)602: Staff Working Document accompanying the Proposal - Executive Summary of the Impact Assessment Report https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=SWD:2021:602:FIN

European Parliament: Legislative Observatory: Procedure File for Proposal on Revision of the EU Emissions Trading System (2021/0211(COD)) https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2021/0211(COD)

European Parliament: Legislative Train Schedule: Revision of the EU emission trading system (ETS) https://www.europarl.europa.eu/legislative-train/theme-a-european-green-deal/file-revision-of-the-eu-emission-trading-system-(ets)

European Commission: DG Climate Action: EU Emissions Trading System (EU ETS) https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-ets_en

European Commission: Priorities 2019-2024: Delivering the European Green Deal https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/delivering-european-green-deal_en

European Commission: Press Release, 14/07/2021: European Green Deal: Commission proposes transformation of EU economy and society to meet climate ambitions https://ec.europa.eu/commission/presscorner/detail/en/IP_21_3541

European Commission: Questions and Answers - Emissions Trading – Putting a Price on carbon (14 July 2021) https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_3542

European Parliament: Press Release, 22/05/2022: Fit for 55 in 2030: MEPs put forward demands on Emissions Trading System reform https://www.europarl.europa.eu/news/en/press-room/20220516IPR29663/

Greens/EFA EP Group: Press Release, 08/06/2022: Fit for 55: European Parliament rejects severely weakened Emission Trading System https://www.greens-efa.eu/en/article/press/fit-for-55-european-parliament-rejects-severely-weakened-emission-trading-system

European Parliament: Press Release, 09/06/2022: Fit for 55: Environment Committee to work on way forward on carbon-pricing laws https://www.europarl.europa.eu/news/en/press-room/20220603IPR32130/

European Parliament: Press Release, 22/06/2022: Fit for 55 in 2030: Parliament wants a more ambitious Emissions Trading System https://www.europarl.europa.eu/news/en/press-room/20220603IPR32158/

Council of the European Union: Press Release, 29/06/2022: Fit for 55 package: Council reaches general approaches relating to emissions reductions and their social impacts https://www.consilium.europa.eu/en/press/press-releases/2022/06/29/fit-for-55-council-reaches-general-approaches-relating-to-emissions-reductions-and-removals-and-their-social-impacts/

Council of the European Union: Press Release, 18/12/2022: 'Fit for 55': Council and Parliament reach provisional deal on EU emissions trading system and the Social Climate Fund https://www.consilium.europa.eu/en/press/press-releases/2022/12/18/fit-for-55-council-and-parliament-reach-provisional-deal-on-eu-emissions-trading-system-and-the-social-climate-fund/

European Parliament: Press Release, 18/12/2022: Climate change: Deal on a more ambitious Emissions Trading System (ETS) https://www.europarl.europa.eu/news/en/press-room/20221212IPR64527/

European Commission: Press Release, 18/12/2022: European Green Deal: EU agrees to strengthen and expand emissions trading, and creates a Social Climate Fund to help people in the transition https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7796

Council of the European Union: Press Release, 25/04/2023: 'Fit for 55': Council adopts key pieces of legislation delivering on 2030 climate targets https://www.consilium.europa.eu/en/press/press-releases/2023/04/25/fit-for-55-council-adopts-key-pieces-of-legislation-delivering-on-2030-climate-targets/

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