Revision of the Emissions Trading Directive
Technology Industries of Finland supports the EU’s 90% emission reduction target for 2040, which represents an intermediate milestone on the path to climate neutrality by 2050.
The EU ETS is central to achieving these objectives. It is a technology-neutral, market-based system covering the whole of the EU. It therefore allows emission reductions to be directed, through a price signal, to where they can be achieved most cost-effectively.
The EU ETS also creates a more level playing field between polluting and cleaner technologies. Finnish companies are frontrunners in developing many of the technologies critical to emission reductions, such as technologies that improve energy efficiency and enable electrification and the uptake of sustainable fuels. Finnish industrial operators have likewise already invested significantly in moving away from fossil fuels and improving energy efficiency.
Maintaining the incentive for investing in the development and deployment of clean technologies requires, above all, consistent and predictable policy. The EU ETS must therefore establish a clear pathway towards the 2040 and 2050 climate targets. The reform must preserve strong incentives for significant emission reductions and for the deployment of innovative technologies. The level of ambition must remain high.
Judging by the accompanying impact assessment, the Commission’s proposal is broadly aligned with the 2040 climate target. In practice, however, the proposal would alter the level of ambition significantly. For example, changes to the LRF would increase the cumulative supply of allowances by 30–40 % in 2031–2040. The broad inclusion of international credits would further weaken incentives for domestic emission reductions.
At the same time, the Commission’s proposal would take important steps towards shaping the ETS into an engine for investments in decarbonisation. The new provisions on the use of revenues would help speed up decarbonisation in the sectors affected by the ETS. Introducing conditions on free allocation, provided that they can be feasibly met and seek to maintain the overall cost-effectiveness of the system, can also contribute to industrial decarbonisation.
The proposal would also introduce important mechanisms for speeding up removals and the deployment of sustainable fuels and other technologies in waterborne transport and aviation.
Further information:
Säkkinen Teppo
Director, Sustainable Growth – Sustainable Growth Technology Industries of Finland