We are approaching the final, crucial stage of the trilogue negotiations for the revision of the Emissions Trading System Directive where European Commission, European Parliament and the Council will negotiate to reach a final compromise on the revised EU ETS Directive starting from their respective initial positions.
So, how is each of the three positions influencing Greece and what should Greece‟s priorities be on the key points of the file?
The three different positions would lead to different outcomes for the EU as a whole and for Greece in particular in terms of overall emission reductions under the EU-ETS, the volume of the allowances distributed to Greece and the corresponding revenues (i.e. the Member State revenues, the Modernisation Fund and the Innovation Fund) and the speed of the phase-out of the allowances offered to the industrial sectors for free along with the phase-in of the new Carbon Border Adjustment Mechanism (CBAM).
In the following we use a model built by CLIMACT to comparatively evaluate the impact each of the three positions have on the abovementioned parameters for Greece.
Based on this analysis, we propose that Greece supports the following positions in the trilogue negotiations:
- Higher climate ambition and a stronger MSR: Greece should support a higher ambition level than that of the Council‟s and the EC‟s preliminary positions of at least 64% emission reduction by 2030 compared to 2005 levels, as well as a stronger Market Stability Reserve (MSR) leading to a tighter control of the oversupply of allowances in the carbon market. In addition to being closer to the
climate commitments the EU has undertaken by signing the Paris Agreement and the leadership role it aspires to play in global climate politics, such a position will be more aligned with the REPowerEU plan which aims at decreasing the dependence on fossil fuels -especially fossil gas- more rapidly. Furthermore, higher climate ambition and a stronger MSR, will most likely lead to increased carbon prices due to the reduced number of allowances in the market, which, will in turn, translate into bigger revenue for Greece from the auctioning of the allowances that it will receive during the rest of the 4th EU ETS phase, as well as from the Modernisation and Innovation Funds.
- Faster phase out of free emission allowances to industry in conjunction with a larger Innovation Fund: Greece should support a faster reduction rate of the emission allowances that are offered for free in the industrial sectors until 2030 and a complete phase-out by 2032 at the latest. At the same time Greece should support a larger Innovation Fund for the decarbonization of its industry. This will contribute the most in the long term competitiveness of the Greek industry, and will reduce its carbon footprint which has remained almost stagnant over the years. Moreover, incentivizing the investments necessary to decarbonize the Greek industry and increasing the available funds for this purpose, will provide a realistic chance for Greece to achieve its ambitious 2030 national climate target set in the first National Climate Law (-55% in net GHG reductions by 2030 compared to 1990 levels).
- Fossil fuel-free ETS-related funds: Funding fossil gas infrastructure through the Modernisation Fund or leaving the door open to do the same with the national revenue from the auctioning of ETS allowances, goes fundamentally against the very scope of the EU ETS, the overall climate targets the EU has committed to, as well as the objective of the REPowerEU plan to tackle the energy crisis. Therefore, Greece should support the full exclusion of all fossil fuels investments (including fossil gas) via the Modernisation Fund, as well as dedicating 100% of the revenue from the auctioned emission allowances to climate action in line with the proposal of the European Parliament, thus contributing to a faster and cheaper transition towards carbon neutrality.