EU leaders agree aviation, maritime ETS

Market: Emissions
21/07/20

EU leaders today reached agreement on the EU's €1 trillion ($1.14 trillion) 2021-27 budget and on a €750bn Covid-19 recovery plan. The agreement foresees revenues from a carbon border adjustment mechanism and a revised EU emissions trading system (ETS) extended to the aviation and maritime sectors.

The deal was only reached early today after discussions since 17 July. The conclusions agreed by EU leaders call for the European Commission to propose, in the first half of 2021, a carbon border adjustment mechanism with a view to its introduction at the latest by 1 January 2023. The commission should put forward a proposal on a revised ETS scheme, "possibly" extending it to the aviation and maritime sectors.

The revenues from the extension of the ETS will be used to help repay loans by the EU to be taken for the €750bn recovery plan. The EU will also introduce and apply a levy on non-recycled plastic waste as of 1 January 2021 and a "digital" tax on revenues from online firms.

EU leaders also agreed to "mainstream" climate actions and achieve an overall climate spending target share of at least 30pc of both the long-term budget and the Covid-19 recovery programme. EU expenditure should be "consistent" with Paris climate agreement objectives and a "do no harm" principle. The text calls for an "effective" methodology for monitoring climate-spending and "relevant" measures in case of insufficient progress. The commission should report annually on climate expenditure.

EU leaders also stipulate that expenditure should comply with the objective of EU climate neutrality by 2050 and contribute to achieving the EU's new 2030 climate targets that "will be updated by the end of the year". But they do not specifically mention exclusion of funding for projects involving solid fossil fuels or natural gas.

EU leaders only propose €10bn for a Just Transition Fund to aid regions in the transition to a climate neutral economy. The commission had increased its proposal for the fund to €40bn.

By Dafydd ab Iago

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