Wed. Jan 26th, 2022
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EP Committee on Industry, Research and Energy (ITRE)

MEP Mauri Pekkarinen
SHORT JUSTIFICATION

The Glasgow Climate Change Conference demonstrated that it will be impossible to limit global warning to around 1.5 degrees with the current measures in place. The Fit for 55 package shows that the EU is prepared to assume its share of responsibility.

The market-based Emissions Trading System (ETS), launched in 2005, has proven viable. It now covers large industrial and energy generation facilities and air traffic within the European Economic Area. Their aggregate emissions account for 41% of all emissions in the EU.

There have been several changes to the ETS since its launch. With the 2018 Regulation it should be possible to achieve a 51% reduction in emissions by 2030. This, however, will not be enough to achieve the EU’s emission target reduction of at least 55% because without any additional measures, the reductions in emissions in certain non-ETS sectors will be insufficient.

The European Commission is now proposing that the sectors covered by the ETS tighten their emission requirements and that maritime transport be gradually incorporated into the ETS. Alongside the ETS, the Commission is proposing a new, separate emissions trading system, which would apply to the heating of buildings and road transport.

This opinion focuses on the key issues that relate to the remit of this committee, i.e. industry, research and energy, and that demonstrate the committee’s shared competence. The opinion also takes account of the costs incurred by maritime transport in icy conditions.

Innovation Fund

The Innovation Fund will be increased substantially by the revenue from an expanded emissions trading system and, for example, the revenue from the reforms to the Carbon Border Adjustment Measure (CBAM) and FuelEU Maritime initiative. At the same time, new forms of support will be created for the Fund alongside the grants available via Carbon Contracts for Difference. The specific details of the new forms of support will have to be examined carefully before they are adopted.

The scope of the Innovation Fund will be extended to cover innovative breakthrough technologies to reduce carbon dioxide emissions from maritime transport and to support the production of low- and zero-carbon fuels and zero-emission fuels for aviation, road and rail transport.

Modernisation Fund

The Commission is proposing a number of changes to the Modernisation Fund in order to build the Fund’s capital by increasing the revenue from the expanded emissions trading system paid into the Fund. At the same time, two additional countries, Greece and Portugal, would be included in the expanded Fund. The Fund would help to support Green Deal projects and projects to improve energy systems and energy efficiency under the European Climate Law in 12 Member States whose GDP is below 65% of the EU average.

Energy generation facilities that use fossil fuels should no longer receive any support from the Modernisation Fund. Funding for energy transition should be increased. A total of 90% of the Fund should be used for priority investments, rather than the 80% proposed by the Commission.

Energy audits

There is some concern regarding the Commission’s proposal that it should be an obligation to conduct energy audits. The issue here is the equal treatment of operators from the perspective of the content and quality of reports.

A more viable alternative would be to require operators to establish an energy management system and follow the recommendations specified in it.

Benchmarks

The calculation of the amount of free allocation must also in future be based on product- specific benchmarks, set according to what is seen as best in the sector. These calculation rules would permit technological development and ensure technological neutrality.

There is no justification for the proposed change to the scope of the Emissions Trading System to exclude installations where biomass emissions represent more than 95% of emissions. If the best installations are no longer going to determine the benchmark value, with additional free allocation the system would reward worse technologies than they do now. The Commission’s proposal should be revised accordingly.

Prevention of carbon leakage

Industry in the EU Member States competes within the internal market and on the global market against similar types of production in the rest of the world. It is important that a reformed ETS does not result in carbon leakage and that our production is not transferred to countries that pollute more than we do.

Under the Commission proposal, there would be a burden on the ETS if the CBAM were to be applied outside the EU. The other member countries outside the EU do not have to deal with any equivalent burden. This means that the EU CBAM sectors outside the Union would be less likely to succeed and it infringes the principle of a ‘level playing field’. Contrary to the Commission proposal, there must be a reduction in free allocation in order to ensure that exports from these sectors remain competitive.

AMENDMENTS:

The Committee on Industry, Research and Energy calls on the Committee on the Environment, Public Health and Food Safety, as the committee responsible, to incorporate the following amendments in its report:

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