2018 State of the EU ETS Report aims to be an independent contribution to the policy debate, which is needed to ensure that the EU ETS is “fit for purpose.” This report discusses the current state of play in the EU ETS while abstaining, to the extent possible, from providing solutions.
The EU Emissions Trading System (EU ETS) is important through its role as the “cornerstone” of EU climate change policy as well as a “role model” and “pioneer” for carbon markets. It is important that, in addition to the regulatory requirements, it be subjected to a thorough and independent review, to discover if it delivers on explicit, and what have become “expected” objectives, as well as discover any issues that need to be better understood. Availability of public data has been identified as a barrier to some parts of this analysis.
To ensure that the EU ETS is ‘fit for purpose’ and ready to face future challenges, the report identified a number of issues that will need to be monitored in the coming years, including:
- Restore short-term scarcity through the Market Stability Reserve;
- Make the EU ETS resilient to policy interactions and to policy uncertainty;
- Make the EU ETS governance operational;
- Manage carbon leakage risk;
- Align the EU ETS with the long-term EU climate ambition, compatible with Paris Agreement goals;
- Provide financial support for low-carbon competitiveness of EU industry and the transition towards a low-carbon economy.