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28th Jan 2023

Member states reaffirm concern over new EU emission trading scheme

  • Seven EU economy ministers have written to the commission concerned about industry exposure to carbon leakage. (Photo: EUobserver)

A group of EU states has written to the European Commission, demanding clarification of its recently proposed overhaul of the union's emissions trading scheme, the cornerstone of its strategy against climate change.

"Medium and long-term investment planning requires certainty on the future framework as soon as possible," says the letter according to the Financial Times. The member states stress that it would be too long to wait three years for necessary details on whether they will still receive pollution permits for free.

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"The question of which industries are particularly exposed to the danger of carbon leakage and how to prevent this phenomenon should be tackled in due time before 2011," the letter reads.

Carbon leakage happens when there is an increase in carbon dioxide emissions by some countries in reaction to emission reductions by countries with a stronger climate legislation.

The correspondence - officially sent on Friday (15 February) - was signed by seven economy ministers from Austria, France, Finland, Germany, Hungary, Luxembourg and the Czech Republic. Estonia and Slovakia informally backed the move.

It comes in response to a reform of the EU's CO2 emissions trading scheme - a cap and trade system designed to curb pollution from industry - which was tabled by the EU's executive body in January as part of the large package of green legislation.

Under the proposal, EU member states should no longer come up with the so-called national allocation plans, meaning they would no longer grant permits to pollute to their companies. Instead, the industry will be forced to buy the right to emit carbon dioxide by auction.

But after tough criticism from several EU capitals, Brussels has agreed to draw up a list of industries that would continue to be given the allowances free of charge. However, the fear is that energy-intensive industries, such as steel, aluminium and cement industries will prefer to set up their productions outside Europe because of strict green rules.

"As the commission recognises, it cannot be our intention to accept a relocation of jobs and production facilities connected with carbon leakage - neither from the point of view of labour market and industrial policies, nor of environment policy," the governments have reiterated as their major concern in the letter.

The seven ministers also called for "global sectoral agreements for energy-intensive industries," so that a "competitive, level playing field" is created by bringing both importers and exporters into the ETS auction system, the FT reports.

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