Council of theEuropean Union
Brussels, 8 February 2023
(OR. en)6210/23
Interinstitutional Files:
2021/0211(COD)
2021/0202(COD)
CLIMA 62
ENV 113
ENER 68
TRANS 49
COMPET 91
ECOFIN 129
CODEC 148
NOTE
From:
To:

General Secretariat of the Council
Delegations

No. prev. doc.:
No. Cion doc.:

5768/23 ADD1 - 3
10875/21 COM (2021) 551; 10902/21 COM (2021) 571

Subject:a) Proposal for a Directive of the European Parliament and of the Council
amending Directive 2003/87/EC establishing a system for greenhouse gas
emission allowance trading within the Union, Decision (EU) 2015/1814
concerning the establishment and operation of a market stability reserve
for the Union greenhouse gas emission trading scheme and Regulation(EU) 2015/757b) Proposal for a Decision of the European Parliament and of the Council
amending Decision (EU) 2015/1814 as regards the amount of allowances
to be placed in the market stability reserve for the Union greenhouse gas
emission trading scheme until 2030
- Letter sent to the Chair of the European Parliament Committee on theEnvironment, Public Health and Food Safety (ENVI)

Following the Permanent Representatives Committee meeting of 8 February 2023 which endorsed
the final compromise texts on the abovementioned proposals with a view to agreement, delegations
are informed that the Presidency sent the attached letter, together with its Annexes, to the Chair of
the European Parliament Committee on the Environment, Public Health and Food Safety (ENVI).

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Council ofミ- tneヒ uropean union
Brussels, 08 February 2023

Mr Pascal CA NFIN
Chair, European Parliament Committee for Environment, Public Health and Food sa ft
European Parliament
Bt.W1LLY BRANDT 041099
60, rue Wiertz /Wiertzstraat 60-1047 Bruxelles/Brussel§ub」旦9t:a) Proposal pr a Directive可the European Parliament andげthe Council amending
Directive 2003/87/C establishing a system fir greenhouse gas emission allowance
trading within the Union, Decision伍の2015/1814 concerning the establishment andoperation可amarket stability reservepr the Union greenhouse gas emission tradingscheine and Regulation伍の2015/75 7口021/0211 (COD))b) Proposal pr a Decisionげ'he European Parliament and可the Council amending
Decision 伍の2015/1814 as regards the amount可allowances to be placed in the market
stabiliり,reserve pr

the

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greenhousegasemissiontrading

scheme""m

2030口021/0202 (COD)ゾ
Dear Mr CANFIN,
Following the informal meeting between the representatives of the three institutions, draft overall
compromise texts on the above-mentioned proposals were agreed today by the Permanent
Representatives' Committee.
Iam therefore now in aposition to confirm that, should the European Parliament adopt its positions
at first reading on the above-mentioned proposals, in accordance with Article 294 paragraph 3 of
the Treaty, in the form set out in the compromise texts contained in the Annexes to this letter(subject to revision by the legal linguists of both institutions), the Council would, in accordancewith Article 294, paragraph 4 0f the Treaty, approve the European Parliament's positions and theacts shall be adopted in the wording which corresponds to the European Parliament's positions.
On behalf of the Council Ialso wish to thank you for your close and swift cooperation which should
enable us to reach agreement on these dossiers at first reading.

Yours sincerely,／
才一 41ヲー

恥粛い

Chairman 0f the Pbrmaent Representatives
Committee (Part 1)
copy to: Frans Timmermans, European Commission Executive Vice-President,Peter LIEsE, Rapporteur (ETS) and Cyrus ENGERER (1SR)

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2021/0211(COD)

DIRECTIVE (EU) 2023/...
OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of ...

amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance
trading within the Union and Decision (EU) 2015/1814 concerning the establishment andoperation of a market stability reserve for the Union greenhouse gas emission trading scheme▌(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union, and in particular Article
192(1) thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national parliaments,
Having regard to the opinion of the European Economic and Social Committee1,
Having regard to the opinion of the Committee of the Regions2,
Acting in accordance with the ordinary legislative procedure3,

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OJ C 152, 6.4.2022, p. 175.
OJ C 301, 5.8.2022, p. 116.
Position of the European Parliament of ... (not yet published in the Official Journal) anddecision of the Council of ...
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ENWhereas:(1)

The Paris Agreement, adopted in December 2015 under the United Nations Framework
Convention on Climate Change (UNFCCC) entered into force in November 2016 (‘theParis Agreement’)4. Its Parties have agreed to hold the increase in the global averagetemperature well below 2 °C above pre-industrial levels and to pursue efforts to limit thetemperature increase to 1,5 °C above pre-industrial levels. This has been reinforced withthe adoption of the Glasgow Climate Pact in November 2021, in which the Conferenceof the Parties recognises that the impacts of climate change will be much lower at thetemperature increase of 1,5 ºC, compared with 2 ºC, and resolve to pursue efforts to limit
the temperature increase to 1,5 ºC.

(1a)

The urgency of the need to keep the Paris Agreement goal of 1,5 °C alive has become
more significant following the findings of the IPCC Sixth Assessment Report, that global
warming can only be limited to 1,5 °C, if strong and sustained reductions in global
greenhouse gas (GHG) emissions within this decade are immediately undertaken.

(2)

Tackling climate and environmental-related challenges and reaching the objectives of theParis Agreement are at the core of the Communication on “The European Green Deal”,
adopted by the Commission on 11 December 20195.

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Paris Agreement (OJ L 282, 19.10.2016, p. 4).
COM(2019)640 final.
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(3)

The European Green Deal combines a comprehensive set of mutually reinforcing measuresand initiatives aimed at achieving climate neutrality in the EU by 2050, and sets out a new
growth strategy that aims to transform the Union into a fair and prosperous society, with amodern, resource-efficient and competitive economy, where economic growth isdecoupled from resource use. It also aims to protect, conserve and enhance the Union's
natural capital, and protect the health and well-being of citizens from environment-relatedrisks and impacts. This transition affects workers from various sectors differently. At thesame time, that transition has gender equality aspects as well as a particular impact onsome disadvantaged and vulnerable groups, such as older people, persons with disabilities,
persons with a minority racial or ethnic background and low and lower-middle income
individuals and households. It also imposes greater challenges on certain regions, inparticular structurally disadvantaged and peripheral regions, as well as islands. It must
therefore be ensured that the transition is just and inclusive, leaving no one behind.

(3a)

On 17 December 2020, the Union submitted its nationally determined contribution(NDC) to the UNFCCC, following their approval by the Council. Directive (EU)2003/87/EC as last amended by Directive 2018/410 is one of the instruments cited,subject to revision in light of the enhanced target, in the general description of the target
in the Annex to that submission. The Council stated in its conclusions of 24 October
2022 that it stands ready, as soon as possible after the conclusions of the negotiations on
the essential elements of ‘Fit for 55’ package, to update, as appropriate, the NDC of the
EU and its Member States, in line with § 29 of the Glasgow Climate Pact to reflect how
the final outcome of the essential elements of ‘Fit for 55’ package implements the EU
headline target as agreed by the European Council in December 2020. As the EU ETS isa cornerstone of the Union’s climate policy and constitutes its key tool for reducing
greenhouse gas emissions in a cost-effective way, the amendments to Directive 2003/87,
including with regard to the scope thereof, adopted through this Directive are part of theessential elements of the “Fit for 55” package.

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(4)

The necessity and value of delivering on the European Green Deal have only grown inlight of the very severe effects of the COVID-19 pandemic on the health, living andworking conditions and well-being of the Union’s citizens, which have shown that oursociety and our economy need to improve their resilience to external shocks and act early
to prevent or mitigate them in a manner that is just and results in no one being left
behind, including those at risk of energy poverty. European citizens continue to express
strong views that this applies in particular to climate change6.

(5)

The Union committed to reduce the Union’s economy-wide net greenhouse gas emissions
by at least 55 % by 2030 below 1990 levels in the updated nationally determined
contribution submitted to the UNFCCC Secretariat on 17 December 20207.

(6)

In Regulation (EU) 2021/1119 of the European Parliament and of the Council8 the Union
has enshrined in legislation the target of economy-wide climate neutrality by 2050, at thelatest, and the aim to achieve negative emissions thereafter. That Regulation alsoestablishes a binding Union domestic reduction commitment of net greenhouse gas
emissions (emissions after deduction of removals) of at least 55 % below 1990 levels by2030. That Regulation also establishes that the Commission should endeavour to alignall future legislative and budgetary proposals with the objectives and targets set out inthat Regulation and, in any case of non-alignment, provide the reasons as part of the
impact assessment accompanying those proposals.

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Special Eurobarometer 513 on Climate Change, 2021
(https://ec.europa.eu/clima/citizens/support_en).
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/
European%20Union%20First/EU_NDC_Submission_December%202020.pdf
Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June
2021 establishing the framework for achieving climate neutrality and amending
Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’) (OJ L 243,9.7.2021, p. 1).
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(7)

All sectors of the economy need to contribute to achieving those emission reductions.
Therefore, the ambition of the EU Emissions Trading System (EU ETS), established by
Directive 2003/87/EC of the European Parliament and of the Council9, should be adjusted
to be in line with the economy-wide net greenhouse gas emissions reduction commitment
for 2030, and be in line with the objective of achieving climate neutrality by 2050 at thelatest, and the aim to achieve negative emissions thereafter, as laid down in Article 2(1)of Regulation (EU) 2021/1119.

(8)

The EU ETS should incentivise production from installations that partly or fully reducegreenhouse gas emissions. Therefore, the description of some categories of activities inAnnex I to Directive 2003/87/EC should be amended to ensure that installations
performing an activity listed in Annex I and meeting the capacity threshold related to thesame activity but not emitting any greenhouse gases are included in the scope of the EU
ETS and therefore to ensure an equal treatment of installations in the sectors concerned.
In addition, free allocation for the production of a product should take into account thecircular use potential of materials and be independent of the feedstock or the type of
production process, where the production processes have the same purpose. It is therefore
necessary to modify the definition of the products and of the processes and emissions
covered for some benchmarks to ensure a level playing field for installations using newtechnologies that partly or fully reduce greenhouse gas emissions and existing
technologies. Notwithstanding the guiding principles, the revised benchmarks for 2026 to2030 should continue to distinguish between primary and secondary production of steel
and aluminium. It is also necessary to decouple the update of the benchmark values forrefineries and for hydrogen to reflect the increasing importance of production of hydrogen,including green hydrogen, outside the refineries sector.

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Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003
establishing a system for greenhouse gas emission allowance trading within the Union andamending Council Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32).
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(8a)

Following the modification of the definitions of the products and of the processes andemissions covered for some benchmarks, it is necessary to ensure that producers do notreceive double compensation for the same emissions with both free allocation andindirect costs compensation, and thus to adjust the financial measures to compensate
indirect costs passed on in electricity prices accordingly.

(9)Council Directive 96/61/EC10 was repealed by Directive 2010/75/EU of the European
Parliament and of the Council11. The references to Directive 96/61/EC in Article 2 ofDirective 2003/87/EC and in its Annex IV should be updated accordingly. Given the needfor urgent economy-wide emission reductions, Member States should be able to act toreduce greenhouse gas emissions that are under the scope of the EU ETS through otherpolicies than emission limits adopted pursuant to Directive 2010/75/EU.

(10)

In its Communication ‘Pathway to a Healthy Planet for All’12, the Commission calls forsteering the EU towards zero pollution by 2050, by reducing pollution across air,freshwaters, seas and soils to levels which are no longer expected to be harmful for healthand natural ecosystems. Measures under Directive 2010/75/EU, as the main instrument
regulating air, water and soil pollutant emissions, will often also enable emissions
greenhouse gases to be reduced. In line with Article 8 of Directive 2003/87/EC, Member
States should ensure coordination between the permit requirements of Directive
2003/87/EC and those of Directive 2010/75/EU.

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Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution
prevention and control (OJ L 257, 10.10.1996, p. 26).
Directive 2010/75/EU of the European Parliament and of the Council of 24 November
2010 on industrial emissions (integrated pollution prevention and control) (OJ L 334,
17.12.2010, p. 17).
Communication from the Commission to the European Parliament, the Council, theEuropean Economic And Social Committee and the Committee of the Regions Pathway to
a Healthy Planet for All, EU Action Plan: 'Towards Zero Pollution for Air, Water and Soil'(COM/2021/400 final).
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(11)

Recognising that new innovative technologies will often allow reducing emissions of bothgreenhouse gases and pollutants, it is important to ensure synergies between policiesdelivering reductions of emissions of both greenhouse gases and pollutants, namely
Directive 2010/75/EU, and review their effectiveness in this regard.

(12)

The definition of electricity generators was used to determine the maximum amount of freeallocation to industry in the period from 2013 to 2020, but led to different treatment ofcogeneration power plants compared to industrial installations. In order to incentivise theuse of high efficiency cogeneration and to level the playing field for all installations
receiving free allocation for heat production and district heating, all references toelectricity generators in Directive 2003/87/EC should be deleted. In addition, Commission
Delegated Regulation (EU) 2019/33113 specifies the eligibility of all industrial processes
for free allocation. Therefore, the provisions on carbon capture and storage in Article
10a(3) of Directive 2003/87/EC have become obsolete and should be deleted.

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Commission Delegated Regulation (EU) 2019/331 of 19 December 2018 determining
transitional Union-wide rules for harmonised free allocation of emission allowances
pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of theCouncil (OJ L 59, 27.2.2019, p. 8).
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(13)

Greenhouse gases that are not directly released into the atmosphere should be consideredemissions under the EU ETS and allowances should be surrendered for those emissions
unless they are stored in a storage site in accordance with Directive 2009/31/EC of theEuropean Parliament and of the Council14, or they are permanently chemically bound in a
product so that they do not enter the atmosphere under normal use and any normal activity
taking place after the end of the life of the product. The Commission should be
empowered to adopt delegated acts specifying the conditions where greenhouse gases areto be considered as permanently chemically bound in a product so that they do not enter
the atmosphere under normal use and any normal activity after the end of life, including
obtaining a carbon removal certificate, where appropriate, in view of regulatory
developments with regard to the certification of carbon removals. The normal activity
after the end of life of the product should be understood broadly, covering all theactivities taking place after the end of life of the product, including disposal, reuse,remanufacturing, recycling, incineration, and landfill.

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Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on
the geological storage of carbon dioxide and amending Council Directive 85/337/EEC,
European Parliament and Council Directives 2000/60/EC, 2001/80/EC, 2004/35/EC,
2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006 (OJ L 140, 5.6.2009, p. 114).
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(14)

International maritime transport activity, consisting of voyages between ports under thejurisdiction of two different Member States or between a port under the jurisdiction of a
Member State and a port outside the jurisdiction of any Member State, has been the onlymeans of transportation not included in the Union's past commitments to reducegreenhouse gas emissions. Emissions from fuel sold in the Union for journeys that departin one Member State and arrive in a different Member State or a third country have grownby around 36 % since 1990. Those emissions represent close to 90 % of all Union
navigation emissions as emissions from fuel sold in the Union for journeys departing andarriving in the same Member State have been reduced by 26 % since 1990. In a businessas-usual scenario, emissions from international maritime transport activities are projected
to grow by around 14 % between 2015 and 2030 and 34 % between 2015 and 2050. If theclimate change impact of maritime transport activities grows as projected, it would
significantly undermine reductions made by other sectors to combat climate change andtherefore to achieve the economy-wide net greenhouse gas emissions reduction target for2030, the Union’s climate-neutrality objective by 2050, at the latest, and the aim ofachieving negative emissions thereafter as laid down in Article 2(1) of Regulation (EU)2021/1119 and the goal of the Paris Agreement.

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(15)

In 2013, the Commission adopted a strategy for progressively integrating maritime
emissions into the Union's policy for reducing greenhouse gas emissions. As a first step inthis approach, the Union established a system to monitor, report and verify emissions frommaritime transport in Regulation (EU) 2015/757 of the European Parliament and of theCouncil15, to be followed by the laying down of reduction targets for the maritime sector
and the application of a market based measure. In line with the commitment of the colegislators expressed in Directive (EU) 2018/410 of the European Parliament and of theCouncil16, action by the International Maritime Organization (IMO) or the Union should
start from 2023, including preparatory work on adoption and implementation of a measureensuring that the sector duly contributes to the efforts needed to achieve the objectives
agreed under the Paris Agreement and due consideration being given by all stakeholders.

(16)

Pursuant to Directive (EU) 2018/410, the Commission should report to the European
Parliament and to the Council on the progress achieved in the IMO towards an ambitious
emission reduction objective, and on accompanying measures to ensure that the maritime
transport sector duly contributes to the efforts needed to achieve the objectives agreed
under the Paris Agreement. Efforts to limit global maritime emissions through the IMO are
under way and should be encouraged, including the rapid implementation of the IMO
Initial Strategy on Reduction of Greenhouse Gas Emissions from Ships, adopted in2018, which also refers to possible market-based measures to incentivise greenhouse gas
emission reductions from international shipping. However, while there recently has been
progress in the IMO, this has so far not been sufficient to achieve the objectives of theParis Agreement. Given the international character of shipping, it is important that theMember States and the Union within their respective competences work with third
countries to step up diplomatic efforts to strengthen global measures and make progresson the development of a global market-based measure at the IMO level.

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Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015
on the monitoring, reporting and verification of carbon dioxide emissions from maritime
transport, and amending Directive 2009/16/EC (OJ L 123, 19.5.2015, p. 55).
Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018
amending Directive 2003/87/EC to enhance cost-effective emission reductions and lowcarbon investments, and Decision (EU) 2015/1814 (OJ L 76, 19.3.2018, p. 3).
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(17)

CO2 emissions from the maritime sector account for around three to four percent ofUnion emissions. In the European Green Deal, the Commission stated its intention to takeadditional measures to address greenhouse gas emissions from the maritime transport
sector through a basket of measures to enable the Union to reach its emissions reduction
targets. In this context, Directive 2003/87/EC should be amended to include the maritime
transport sector in the EU ETS in order to ensure this sector contributes its fair share to theincreased climate objectives of the Union as well as to the objectives of the Paris
Agreement, which requires developed countries to take the lead by undertaking economywide emission reduction targets, while developing countries are encouraged to move overtime towards economy-wide emission reduction or limitation targets17. Considering thatemissions from international aviation outside Europe should be capped from January 2021
by global market-based action while there is no action in place that caps or prices maritime
transport emissions, it is appropriate that the EU ETS covers a share of the emissions fromvoyages between a port under the jurisdiction of a Member State and port under thejurisdiction of a third country, with the third country being able to decide on appropriate
action in respect of the other share of emissions. The extension of the EU ETS to themaritime transport sector should thus include half of the emissions from ships performing
voyages arriving at a port under the jurisdiction of a Member State from a port outside thejurisdiction of a Member State, half of the emissions from ships performing voyages
departing from a port under the jurisdiction of a Member State and arriving at a port
outside the jurisdiction of a Member State, emissions from ships performing voyages
arriving at a port under the jurisdiction of a Member State from a port under thejurisdiction of a Member State, and emissions within a port under the jurisdiction of a
Member State. This approach has been noted as a practical way to solve the issue ofCommon but Differentiated Responsibilities and Capabilities, which has been alongstanding challenge in the UNFCCC context. The coverage of a share of the emissions
from both incoming and outgoing voyages between the Union and third countries ensuresthe effectiveness of the EU ETS, notably by increasing the environmental impact of themeasure compared to a geographical scope limited to voyages within the EU, while
limiting the risk of evasive port calls and the risk of delocalisation of transhipment
activities outside the Union. To ensure a smooth inclusion of the sector in the EU ETS, the176210/23
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Paris Agreement, Article 4(4).
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surrendering of allowances by shipping companies should be gradually increased withrespect to verified emissions reported for the period 2024 to 2025. To protect theenvironmental integrity of the system, to the extent that fewer allowances are surrendered
in respect of verified emissions for maritime transport during those years, once thedifference between verified emissions and allowances surrendered has been establishedeach year, a corresponding ▌number of allowances should be cancelled. As from 2026,
shipping companies should surrender the number of allowances corresponding to all of
their verified emissions. While the climate impact of maritime transport is mainly due tocarbon dioxide emissions, non-CO2 emissions represent a significant share of shipping
emissions. According to the Fourth IMO Greenhouse Gas Study18, methane emissions
increased significantly over the period 2012-2018. Methane and nitrous oxide emissions
will likely grow over time, notably with the development of vessels powered by liquefied
natural gases or other energy sources. The inclusion of methane and nitrous oxide
emissions would be beneficial for environmental integrity and incentivising goodpractices. These emissions should first be included in Regulation (EU) 2015/757 as from2024 and they should be included in the EU ETS as from 2026.

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International Maritime Organization, Fourth IMO Greenhouse Gas Study 2020, p. 110.
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(17a)The extension of the scope of Directive 2003/87/EC to maritime transport will lead tochanges in the cost of shipping. All parts of the Union will be affected by this as the
goods transported to and from ports within the Union by maritime transport have their
origin or destination in the different Member States, including in landlocked Member
States. The allocation of allowances to be auctioned by the Member States should
therefore, in principle, not change as a consequence of the inclusion of maritime
activities and include all Member States. However, Member States will be affected todifferent extents. Notably Member States with a high reliance on shipping will be most
exposed to the effect of the extension. Member States with a large maritime sector
compared to their relative size will be more affected by the extension of the EU ETS tomaritime transport. It is therefore appropriate to provide additional time-limited
assistance to those Member States in the form of additional allowances to support
decarbonisation of maritime activities and for the administrative costs incurred. The
assistance should be gradually introduced in parallel with the introduction of surrenderobligations and thus with the increased effect on those Member States. Within thecontext of the review of Directive 2003/87/EC, the Commission should consider the
relevance of this additional assistance in light, notably, of the development in the
shipping companies under the responsibility of different Member States.

(17b)

The EU ETS should contribute significantly to reducing greenhouse gas emissions frommaritime activities and to increasing efficiency. The use of EU ETS revenues pursuant
to Article 10(3) of the Directive should include, inter alia, the promotion of climate
friendly transport and public transport in all sectors.

(17c)

Renewing fleets of ice-class ships and developing innovative technology that reduces theemissions of such ships will take time and require financial support. Currently, thedesign enabling ice-class ships to sail in ice conditions, leads to such ships consuming
more fuel and emitting more than ships of similar size designed for sailing only in open
water. Therefore, a flag-neutral method should be implemented under this Directive
allowing for a reduction of allowances to be surrendered by shipping companies on thebasis of their ships’ ice class until 31 December 2030.

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(17d)

Islands with no road or rail link with the mainland are more dependent on maritime
transport than the other regions and depend on maritime links for their connectivity. In
order to assist islands with a smaller population to remain connected following theinclusion of maritime activities in the scope of Directive 2003/87/EC it is appropriate toprovide for the possibility to provide for a temporary derogation from the surrenderobligations under that Directive for certain maritime transport activities with islands
with a population lower than 200 000 inhabitants.

(17e)

It should be possible for Member States to request that transnational public service
contract or a transnational public service obligation between two Member States shouldbe temporarily exempted from certain obligations under Directive 2003/87/EC. The
possibility should be limited to connections between a Member State without a landborder with another Member State and the geographically closest Member State, such as
the maritime connection between Cyprus and Greece, which has been absent for overtwo decades. This temporary derogation contributes to the compelling need to provide aservice of general interest and ensure connectivity as well as economic, social andterritorial cohesion.

(17f)

Taking into account the special characteristics and permanent constraints of theoutermost regions of the Union as recognised in Article 349 of the Treaty, and given
their heavy dependence on maritime transport, special consideration should be given topreserving their accessibility and efficient connectivity by maritime transport. Therefore,a temporary derogation from certain obligations pursuant to Directive 2003/87/EC
should be provided for emissions from maritime transport activities between a port
located in an outermost region of a Member State and a port located in the same
Member State, including ports located in the same outermost region and in anotheroutermost region of the same Member State.

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(18)

The provisions of Directive 2003/87/EC as regards maritime transport activities should be
kept under review in light of future international developments and efforts undertaken toachieve the objectives of the Paris Agreement, including the second global stocktake in
2028, and subsequent global stocktakes every five years thereafter, intended to inform
successive nationally determined contributions, and in the event of the adoption by the
IMO of a global market-based measure to reduce greenhouse gas emissions frommaritime transport. To this end, the Commission should present a report to the European
Parliament and to the Council within 18 months of the adoption of such a measure andbefore it becomes operational. The Commission should in that report examine that
global market-based measure as regards its ambition in light of the objectives of theParis Agreement, its overall environmental integrity, including compared to theprovisions of this Directive covering maritime transport, and any issue related to thecoherence of the EU ETS and that measure, in particular taking into account the levelof participation in that global market-based measure, its enforceability, transparency,
penalties for non-compliance, the processes for public input, monitoring, reporting andverification of emissions, registries and accountability. Where appropriate, the report
should be accompanied by a legislative proposal to amend this Directive in a mannerthat is consistent with the Union 2030 climate target and the climate-neutrality objective
as set out in Regulation (EU) 2021/1119 and with the aim of preserving theenvironmental integrity and effectiveness of Union climate action, to ensure coherence
between the implementation of a global market-based measure adopted by the IMO,
while avoiding any significant double burden, and thereby recalling the Union’scompetence to regulate its share of emissions from international shipping voyages, inline with the obligations of the Paris Agreement.

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(18a)

With the increased costs of shipping which the extension of Directive 2003/87/EC tomaritime shipping activities entails, there is in the absence of a global measure a risk ofcircumvention. Evasive port calls to ports outside of the Union and relocation oftranshipment activities to ports outside of the Union will not only diminish theenvironmental benefits of internalising the cost of emissions from maritime activities but
may lead to additional emissions due to the extra distance travelled to evade applicationof Directive 2003/87/EC. It is therefore appropriate to exclude from the concept of portof call certain stops at non-Union ports. That exclusion should be targeted to ports in theUnion’s vicinity where the risk of evasion is the largest. A limit of 300 nautical miles
from a port under the jurisdiction of a Member State constitutes a proportionate
response to evasive behaviour, balancing the additional burden and the risk of evasion.
Moreover, the exclusion from the concept of port of call should only target stops bycontainerships at certain non-Union ports, where the transhipment of containers
accounts for most container traffic. For such shipments, the risk of evasion, in theabsence of mitigating measures, also consists in a shift of port hub to ports outside theUnion, aggravating the effects of the evasion. To ensure the proportionality and equal
treatment of the measure, account should be taken to measures in third countries thathave an effect equivalent to Directive 2003/87/EC.

(19)

The Commission should review the functioning of Directive 2003/87/EC in relation tomaritime transport activities in the light of experience of its application, including
detecting evasive behaviour in order to prevent them at an early stage, and should thenpropose measures to ensure its effectiveness. Such measure could include increased
surrender requirements for voyages where the evasion risk is higher, such as to andfrom a port that is located in the Union’s vicinity, in a third country that has not adopted
measures similar to Directive 2003/87/EC.

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(19a)

Shipping emissions from vessels below 5 000 gross tonnage represent less than 15 % ofshipping emissions, taking into account the scope of application of this Directive, but are
emitted by a large number of ships. The inclusion of these vessels from the start of the
inclusion of maritime transport in the EU ETS is too early for reasons of administrative
practicability, but their inclusion in the future would improve the effectiveness of the
ETS and potentially reduce evasive behaviour with the use of vessels below the 5 000
gross tonnage threshold. Therefore, no later than 31 December 2026, the Commission
should present a report to the European Parliament and to the Council in which it
should examine the feasibility and economic, environmental and social impacts of the
inclusion in this Directive of emissions from ships below 5 000 gross tonnage, including
offshore ships.

(20)

The person or organisation responsible for the compliance with the EU ETS should be theshipping company, defined as the ship owner or any other organisation or person, such as
the manager or the bareboat charterer, that has assumed the responsibility for the operationof the ship from the ship owner and that, on assuming such responsibility, has agreed totake over all the duties and responsibilities imposed by the International Management Codefor the Safe Operation of Ships and for Pollution Prevention. This definition is based on
the definition of ‘company’ in Article 3, point (d) of Regulation (EU) 2015/757, and in linewith the global data collection system established in 2016 by the IMO.

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(20a)The emissions from a ship depend inter alia on the vessel energy efficiency measurestaken by the ship-owner and the fuel, the cargo carried, the route and the speed of theship which may be under the control of a different entity than the ship-owner. The
responsibilities for purchasing fuel or taking operational decisions that affect thegreenhouse gas emissions of the ship may be assumed by an entity other than the
shipping company under a contractual arrangement. At the point of contract
negotiation, mainly the latter aspects would not be known and thus the ultimate
emissions from the ship covered by Directive 2003/87/EC would be uncertain. However,
without a pass-through of carbon costs to the entity operating the ship, the incentives toimplement operational measures for fuel efficiency would be limited. In line with thepolluter pays principle and to encourage the adoption of efficiency measures and theuptake of cleaner fuels, the shipping company should therefore be entitled, undernational law, to claim reimbursement for the costs arising from the surrender ofallowances from the entity that is directly responsible for the decisions affecting thegreenhouse gas emissions of the ship. While such a mechanism of reimbursement could
be subject to a contractual arrangement, Member States should, to reduce administrative
costs, not be obliged to ensure or control the existence of such contracts but should
instead provide, in national law, a statutory entitlement for the shipping company to be
reimbursed and the corresponding access to justice to enforce that entitlement. For thesame reasons, this entitlement, including any possible conflict relating to thereimbursement between the shipping company and the entity operating the ship, should
not affect the obligations of the shipping company vis-à-vis the administering authority
nor the enforcement measures that might be necessary against such a company toensure the full compliance with Directive 2003/87/EC. At the same time, as the purpose
served by the provision concerning the entitlement to reimbursement is closely connectedwith the Union, in particular in relation to the compliance with obligations under thisDirective by a shipping company vis-a-vis a given Member State, it is important that thisentitlement is observed throughout the Union, in all contractual relations that allow
another entity than the ship owner to determine the cargo carried and/or the route andthe speed of the ship, in a manner that safeguards undistorted competition in theinternal market, which can include provisions preventing parties to such contractual
agreements from circumventing the entitlement to reimbursement by a choice of law
clause.

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(21)

In order to reduce the administrative burden on shipping companies, one Member Stateshould be responsible for each shipping company. The Commission should publish an
initial list of shipping companies that performed a maritime activity falling within thescope of the EU ETS, which specifies the administering authority in respect of eachshipping company. The list should be updated regularly and at least every two years toreattribute shipping companies to another administering authority as relevant. For shipping
companies registered in a Member State, the administering authority should be that
Member State. For shipping companies registered in a third country, the administering
authority should be the Member State in which the shipping company had the greatest
estimated number of port calls from voyages falling within the scope of Directive
2003/87/EC in the last four monitoring years. For shipping companies registered in a third
country and which did not perform any voyage falling within the scope of Directive
2003/87/EC in the last four monitoring years, the administering authority should be theMember State ▌where a ship of the shipping company arrived or started its first voyage
falling within the scope of that Directive. The Commission should publish and update on abiennial basis a list of shipping companies falling within the scope of Directive
2003/87/EC, as relevant, specifying the administering authority for each shipping
company. In order to ensure equal treatment of shipping companies, Member States should
follow harmonised rules for the administration of shipping companies for which they have
responsibility, in accordance with detailed rules to be established by the Commission.

(22)

Member States should ensure that the shipping companies that they administer comply
with the requirements of Directive 2003/87/EC. In the event that a shipping company fails
to comply with those requirements and any enforcement measures taken by theadministering authority have failed to ensure compliance, Member States should act insolidarity. As a last resort measure, Member States should be able to refuse entry to theships under the responsibility of the shipping company concerned, except for the Member
State whose flag the ship is flying, which should be able to detain that ship.

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(23)

Shipping companies should monitor and report their aggregated emissions data frommaritime transport activities at company level in accordance with the rules laid down inRegulation (EU) 2015/757. The reports on aggregated emissions data at company levelshould be verified in accordance with the rules laid down in that Regulation. Whenperforming the verifications at company level, the verifier should not verify the emissions
report at ship level and the report referred to in Article 11(2) of that Regulation, as thosereports at ship level would have been already verified.

(24)

Based on experience from similar tasks related to environmental protection, the European
Maritime Safety Agency (EMSA) or another relevant organisation should, as appropriate
and in accordance with its mandate, assist the Commission and the administering
authorities in respect of the implementation of Directive 2003/87/EC. Owing to its
experience with the implementation of Regulation (EU) 2015/757 and its IT tools, EMSA
should assist the administering authorities notably as regards the monitoring, reporting andverification of emissions generated by maritime activities under the scope of this Directive
by facilitating the exchange of information or developing guidelines and criteria. The
Commission, assisted by the European Maritime Safety Agency, should endeavour todevelop appropriate monitoring tools, as well as guidance to facilitate and coordinate
verification and enforcement activities related to the application of this Directive tomaritime transport. As far as practicable, such tools should be made available to theMember State and the verifiers in order to better ensure robust enforcement of thisDirective.

(24a)

In parallel to the adoption of this Directive, Regulation (EU) 2015/757 is being amended
to provide for monitoring, reporting and verification rules that are necessary for an
extension of the EU ETS to maritime transport activities and to provide for themonitoring, reporting and verification of emissions of additional greenhouse gases andship types.

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(25)

Regulation (EU) 2017/2392 of the European Parliament and of the Council19 amended
Article 12(3) of Directive 2003/87/EC to allow all operators to use all allowances that areissued. The requirement for greenhouse gas emissions permits to contain an obligation tosurrender allowances, pursuant to Article 6(2), point (e), of that Directive, should bealigned accordingly.

(26)

Achieving the Union’s emissions reduction target for 2030 will require a reduction in theemissions of the sectors covered by the EU ETS of 62 % compared to 2005. The Unionwide quantity of allowances of the EU ETS needs to be reduced to create the necessary
long-term carbon price signal and drive for this degree of decarbonisation. The total
quantity of allowances should be reduced in 2024 and 2026 to bring it more in line withthe actual emissions. Moreover, the linear reduction factor should be increased in 2024
and in 2028, also taking into account the inclusion of emissions from maritime transport.
The steeper cap trajectory resulting from these changes will lead to significantly greaterlevels of cumulative emission reductions up to 2030 than would have occurred pursuant
to Directive (EU) 2018/410 of the European Parliament and of the Council. The figures
relating to the maritime inclusion should be derived from the emissions from maritime
transport activities that are addressed in Article 3g of Directive 2003/87/EC and reported
in accordance with Regulation (EU) 2015/757 for 2018 and 2019 in the Union and the
EEA-EFTA States, adjusted, from ▌2021 until 2024, by the linear reduction factor for theyear 2024. The linear reduction factor will be applied in 2024 to the increase of theUnion-wide quantity of allowances in that year.

▌

19

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Regulation (EU) 2017/2392 of the European Parliament and of the Council of 13
December 2017 amending Directive 2003/87/EC to continue current limitations of scopefor aviation activities and to prepare to implement a global market-based measure from2021 (OJ L 350, 29.12.2017, p. 7).
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(28)

Achieving the increased climate ambition will require substantial public and private
resources in the EU as well as in Member States to be dedicated to the climate transition.
To complement and reinforce the substantial climate-related spending in the EU budget, allauction revenues or the equivalent financial value that are not attributed to the Union
budget in the form of own resources should be used for climate-related purposes, with the
exception of the revenues used for the compensation of indirect carbon costs. The list of
climate-related purposes in Article 10(3) of Directive 2003/87/EC should be expanded tocover additional purposes with a positive environmental impact. This includes the use forfinancial support to address social aspects in lower- and middle-income households by
reducing distortive taxes and targeted reductions of duties and charges for renewableelectricity. Member States should report annually on the use of auctioning revenues inaccordance with Article 19 of Regulation (EU) 2018/1999 of the European Parliamentand of the Council, specifying, as appropriate, if revenues are used to implement theirintegrated national energy and climate plans and their territorial just transition plans.

(28a)Member States’ auctioning revenue will increase as a result of the inclusion of themaritime sector under the EU ETS. Therefore, Member States are encouraged toincrease the use of EU ETS revenues pursuant to Article 10(3) of Directive 2003/87/EC
to contribute to the protection, restoration and better management of marine-based
ecosystems, in particular marine protected areas.

(28b)

Significant financial resources are needed to implement the goals of the Paris
Agreement in developing countries and the Glasgow Climate Pact urges developed
country Parties to urgently and significantly scale up their provision of climate finance.
The Council conclusions on the Preparations for the 27th Conference of the Parties(COP 27) of the UNFCCC recall that the EU and its Member States are the largest
contributor to international public climate finance and have more than doubled theircontribution to climate finance to support developing countries since 2013. It also
renews the strong commitment made by the EU and its Member States to continue
scaling up their international climate finance towards the developed countries' goal ofmobilising at least USD 100 billion per year as soon as possible and through to 2025
from a wide variety of sources, expecting the goal to be met in 2023.

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(28c)

To address distributional and social effects of the transition in low-income Member
States, an additional amount of 2,5 % of the Union-wide quantity of allowances from2024 to 2030 should be used to fund the energy transition of the Member States with agross domestic product (GDP) per capita below 75 % of the Union average in 2016-2018,
through the Modernisation Fund referred to in Article 10d of Directive 2003/87/EC.

(28d)

The beneficiary Member States should be able to use the resources allocated to theModernisation Fund to finance investments involving the adjacent EU border regions
when this is relevant to the energy transition of beneficiary Member States.

(29)

Further incentives to reduce greenhouse gas emissions by using cost-efficient techniquesshould be provided. To that end, the free allocation of emission allowances to stationary
installations from 2026 onwards should be conditional on investments in techniques toincrease energy efficiency and reduce emissions, in particular for large energy users. The
Commission should ensure that the application of the conditionality does not jeopardisea level playing field, environmental integrity and equal treatment between installations
across the Union. The Commission should therefore without prejudice to the rules
applicable under Directive 2012/27/EU of the European Parliament and of theCouncil20, adopt delegated acts supplementing this Directive to address any issue
identified in particular on the above mentioned principles and provide foradministratively simple rules for the application of the conditionality. These rules shouldbe part of the general rules for free allocation, using the established procedure fornational implementing measures, and provide timelines, criteria for the recognition of
implemented energy efficiency measures as well as for alternative measures reducing
GHG emissions. In addition, incentives to reduce greenhouse gas emissions should befurther reinforced for installations with high greenhouse gas emission intensities. To
that end, from 2026 onwards, the free allocation of emission allowances to the 20 %stationary installations with the highest emission intensities under a given productbenchmark should also be conditional on the set-up and implementation of climate
neutrality plans.

206210/23
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Directive 2012/27/EU of the European Parliament and of the Council of 25 October
2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU andrepealing Directives 2004/8/EC and 2006/32/EC (OJ L 315, 14.11.2012, p. 1).
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(30)

The Carbon Border Adjustment Mechanism (CBAM), established under Regulation (EU)
20…/nn of the European Parliament and of the Council21 [CBAM Regulation], is set to
replace the mechanisms established under Directive 2003/87/EC to prevent the risk ofcarbon leakage. To the extent that sectors and subsectors are covered by that measure, theyshould not receive free allocation. However, a transitional phasing-out of free allowancesis needed to allow producers, importers and traders to adjust to the new regime. The
reduction of free allocation should be implemented by applying a factor to free allocation
for CBAM sectors, while the CBAM is phased in. The CBAM factor▌ should be equal to
100 % for the▌ period between the entry into force of that Regulation ▌ and the end of2025, and subject to the application of provisions referred to in Article 36(3), point (b),of that Regulation, should be equal to 97,5 % in 2026, 95 % in 2027, 90 % in 2028,
77,5 % in 2029, 51,5 % in 2030, 39 % in 2031, 26,5 % in 2032 and 14 % in 2033. From
2034, no CBAM factor should apply. The relevant delegated acts on free allocation should
be adjusted accordingly for the sectors and subsectors covered by the CBAM. The freeallocation no longer provided to the CBAM sectors based on this calculation (CBAM
demand) will be added to the Innovation Fund, so as to support innovation in low carbon
technologies, carbon capture and utilisation (‘CCU’), carbon capture and geologicalstorage (‘CCS’), renewable energy and energy storage, in a way that contributes tomitigating climate change. In this context, special attention should be given to projects in
CBAM sectors. To respect the proportion of the free allocation available for the nonCBAM sectors, the final amount to be deducted from the free allocation and madeavailable under the Innovation Fund should be calculated based on the proportion that
the CBAM demand represents in respect of the free allocation needs of all sectors
receiving free allocation.

21

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(30a)In order to mitigate potential carbon leakage risks related to goods subject to CBAM andproduced in the Union for export to third countries which do not apply the EU ETS or asimilar carbon pricing mechanism, an assessment should be carried out before the endof the transitional period under Regulation (EU) 20…/nn [CBAM Regulation]. Where
the report concludes that there is such a carbon leakage risk, the Commission should,
where appropriate, present a legislative proposal to address that carbon leakage risk in amanner that is compliant with WTO rules. Moreover, Member States should be allowed
to use auction revenues to address any residual risk of carbon leakage in CBAM sectors
and in accordance with State aid rules. Where allowances due to a reduction of freeallocation in application of the conditionality rules are not fully used to exempt the
installations with the lowest greenhouse gas emission intensity from the cross-sectoral
correction, 50 % of these residual allowances should be added to the Innovation Fund,while the other 50 % should be auctioned on behalf of Member States, which theyshould be able to use to address any residual risk of carbon leakage in CBAM sectors.

(31)

In order to better reflect technological progress ▌while ensuring emission reduction
incentives and properly rewarding innovation, the minimum adjustment of the benchmark
values should be increased from 0,2 % to 0,3 % per year, and the maximum adjustment▌should be increased from 1,6 % to 2,5 % per year. For the period from 2026 to 2030, thebenchmark values should thus be adjusted within a range of 6 % to 50 % compared to thevalue applicable in the period from 2013 to 2020. In order to provide predictability to
installations, the Commission should adopt the implementing acts determining therevised benchmark values for free allocation as soon as possible before the start of theperiod from 2026 to 2030.

(31a)

To incentivise new breakthrough technologies in the steel industry and to avoid asignificantly disproportionate reduction of the benchmark value and in light of theparticular situation of the steel industry such as the high emission intensity and theinternational and Union market structure, it is necessary to exclude from the calculationof the hot metal benchmark value for the period 2026-2030 installations that wereoperational during the reference period 2021-2022 and that would otherwise be includedin that calculation due to the review of its definition.

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(31b)To reward best performers and innovation, installations whose greenhouse gas emission
levels are below the average of the 10 % most efficient installations under a givenbenchmark should be excluded from the application of the cross-sectoral correction
factor. Allowances that are not allocated due to a reduction of free allocation inapplication of the conditionality rules should be used to cover the deficit in the reductionof free allocation resulting from excluding best performers from the application of thecross-sectoral correction factor.

(31c)

In order to speed up the decarbonisation of the economy while strengthening EU
industrial competitiveness, an additional 20 million allowances from the quantity which
could otherwise be allocated for free and an additional 5 million allowances from thequantity which could otherwise be auctioned should be made available to the Innovation
Fund. When reviewing the timing and sequencing of the auctioning of the Innovation
Fund established in Commission Regulation (EU) No 1031/2010 in view of the changes
introduced by this Directive, the Commission should consider making available larger
amounts of resources in the first years of implementation of the revised Directive
2003/87/EC to boost the decarbonisation of relevant sectors.

(32)

A comprehensive approach to innovation is essential for achieving the objectives ofRegulation (EU) 2021/1119. At EU level, the necessary research and innovation efforts
are supported, among others, through Horizon Europe which include significant funding
and new instruments for the sectors coming under the ETS. Consequently, theCommission should seek synergies with Horizon Europe and, where relevant, with other
Union funding programmes.

(32a)

The Innovation Fund should support innovative techniques, processes and technologies,
including the scaling up of such techniques, processes and technologies, with a view totheir broad roll-out across the EU. Breakthrough innovation should be prioritized in theselection of projects supported through grants.

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(33)

The scope of the Innovation Fund referred to in Article 10a(8) of Directive 2003/87/EC
should be extended to support innovation in zero- and low-carbon technologies andprocesses that concern the consumption of fuels in the sectors of buildings and roadtransport, including collective forms of transport such as public transport and coachservices. In addition, the Innovation Fund should serve to support investments todecarbonise the maritime transport sector, including investments in energy efficiency ofships, ports, short-sea shipping, in electrification of the sector, in sustainable alternative
fuels, such as hydrogen and ammonia that are produced from renewables, as well as zeroemission propulsion technologies like wind technologies, and innovations in regard to
ice-class ships. Special attention should be given to innovative projects contributing todecarbonize the maritime sector and reduce all of its climate impacts, including black
carbon emissions. In that respect, the Commission should foresee dedicated topics inInnovation Fund calls for proposals. The calls should take biodiversity protection, noise
and water pollution issues into account. As far as maritime transport is concerned,
projects with clear EU added value should be eligible.

(34)

Pursuant to Article 10 of Commission Regulation (EU) No 2019/112222, where aircraft
operators no longer operate flights covered by the EU ETS, their accounts are set to
excluded status, and processes may no longer be initiated from those accounts. To preserve
the environmental integrity of the system, allowances which are not issued to aircraft
operators due to their closure should be used to cover any shortfall in surrenders by those
operators, and any leftover allowances should be used to accelerate action to tackle climatechange by being placed in the Innovation Fund.

226210/23
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Commission Delegated Regulation (EU) 2019/1122 of 12 March 2019 supplementing
Directive 2003/87/EC of the European Parliament and of the Council as regards thefunctioning of the Union Registry (OJ L 177, 2.7.2019, p. 3).
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(34a)

Technical assistance from the Commission focused on Member States from which few or
no projects have been submitted so far would contribute to achieving a high number ofproject applications for funding by the Innovation Fund across all Member States. This
assistance should among others support activities aimed at improving the quality of
proposals for projects located in the Member States mentioned, for example throughsharing information, lessons learned and best practice and at boosting the activities of
National Contact Points. Other measures serving the same aim would be raisingawareness of funding options and increasing the capacity of those Member States to
identify and support potential project applicants. Project partnerships across Member
States and matchmaking between potential applicants, in particular for large-scale
projects, should also be promoted.

(34b)

In order to improve the role of Member States in the governance of the Innovation Fundand increase transparency, the Commission should report to the Climate Change
Committee on the implementation of the Innovation Fund, providing an analysis of the
expected impact of awarded projects by sector and by Member State. The Commission
should also provide the report to the Council and the European Parliament and make itpublic. Subject to the agreement of applicants, following the closure of a call for
proposals, the Commission should inform Member States of the applications for fundingof projects in their respective territories and should provide them with detailed
information of those applications in order to facilitate the Member States’ coordinationof the support to projects. In addition, the Commission should inform the Member States
about the list of pre-selected projects prior to the award of the support. Member Statesshould ensure that the national transposition provisions do not hamper innovations andare technologically neutral, while the Commission should provide technical assistance,in particular to Member States with low effective participation, in order to improve theeffective geographical participation in the Innovation Fund and increase the overall
quality of submitted projects. The Commission should also ensure comprehensive
monitoring and reporting, including information on progress towards effective, qualitybased geographical coverage across the Union and appropriate follow up.

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TREE 1.A30EN(34c)In order to align with the comprehensive nature of the European Green Deal, theselection process of projects supported through grants should give priority to projects
addressing multiple environmental impacts. In order to support the replication and thefaster market penetration of the supported technologies or solutions, projects funded by
the Innovation Fund should share knowledge with other relevant projects as well as with
Union-based researchers having a legitimate interest.

(35)

Contracts for Difference (CDs), Carbon Contracts for Difference (CCDs) and fixed
premium contracts are ▌important elements to trigger emission reductions in industry by
up-scaling new technologies, offering the opportunity to guarantee investors in innovative
climate-friendly technologies a price that rewards CO2 emission reductions above thoseinduced by the prevailing carbon price level in the EU ETS. The range of measures that
the Innovation Fund can support should be extended to provide support to projects throughprice-competitive bidding, leading to the award of CDs, CCDs or fixed premium
contracts. Competitive bidding would be an important mechanism for supporting thedevelopment of decarbonisation technologies and optimising the use of available
resources. It would also offer certainty to investors in these technologies. In view ofminimising any contingent liability for the Union budget, risk mitigation should beensured in the design of CDs and CCDs and appropriate coverage by a budgetarycommitment should be provided with full coverage at least for the first two rounds withappropriations resulting from the proceeds of auctioning of allowances allocatedpursuant to Article 10a(8) of Directive 2003/87/EC. No such risks exist for fixed
premium contracts, because the legal commitment will be covered by a matchingbudgetary commitment. In addition, the Commission should conduct, after concluding
the first two rounds of CDs and CCDs, and each time it is necessary afterwards, aqualitative and quantitative assessment of the financial risks arising from theirimplementation. By a delegated act based on the results of that assessment, theCommission should be allowed to decide to use an appropriate provisioning rate rather
than full coverage for further rounds of CDs or CCDs. Such an approach should take
into account any elements that may reduce the financial risks for the Union budget, in
addition to the allowances available in the Innovation Fund, such as possible sharing ofliability with Member States, on a voluntary basis, or a possible re-insurance mechanism

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from the private sector. It is therefore necessary to allow for derogations from parts ofTitle X of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of theCouncil23. The provisioning rate for the first two rounds of bidding should be 100 %.
However, derogating from Article 210(1), 211(1), 211(2) and 218(1) of that Regulation, aminimum provisioning rate of 50 % as well as a maximum share of revenue from theInnovation Fund to be used for provisioning of 30 % should be set in this Directive forlater rounds and the Commission should be able to specify the provisioning ratenecessary on the basis of the experience from the first two calls and the amount ofrevenue to be used for provisioning. The total financial liability borne by the Union
budget should thus not exceed 60 % of the proceeds from auctioning for the Innovation
Fund. Moreover, as provisioning will come, in general, from the Innovation Fund,derogations should be made from rules in Article 212 to 214 of that Regulation relating
to the common provisioning fund established by Article 212 of that Regulation. The
novel nature of CDs and CCDs might also necessitate derogations from Articles
209(2)(d) and (h) of that Regulation, given that they do not rely on leverage/multipliers
nor depend entirely on an ex ante assessment, from Article 219(3), due to the link to
Article 209(2)(d), and from Article 219(6) thereof as implementing partners will not havecredit/equity exposures under a guarantee. The use of any derogation from that
Regulation should be limited to what is necessary. The Commission should be
empowered to amend the maximum share of revenue from the Innovation Fund to be
used for provisioning by no more than a total of 20 percentage points above what isprovided for in this Directive.
(35a)

The Innovation Fund is subject to the general regime of conditionality for the protectionof the Union budget established by Regulation (EU, Euratom) 2020/2092.

23

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Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of
18 July 2018 on the financial rules applicable to the general budget of the Union,
amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013,(EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU)No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom)
No 966/2012 (OJ L 193, 30.7.2018, p. 1).
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(36)

Where an installation’s activity is temporarily suspended, free allocation is adjusted to theactivity levels which are mandatorily reported annually. In addition, competent authorities
can suspend the issuance of emission allowances to installations that have suspended
operations as long as there is no evidence that they will resume operations. Therefore,
operators should no longer be required to demonstrate to the competent authority that theirinstallation will resume production within a specified and reasonable time in case of atemporary suspension of the activities.

(37)

Corrections of free allocation granted to stationary installations pursuant to Article 11(2) ofDirective 2003/87/EC can require granting additional free allowances or transferring backsurplus allowances. The allowances set aside for new entrants under Article 10a(7) of
Directive 2003/87/EC should be used for those purposes.

(37a)

Since 2013, electricity producers have been obliged to purchase all the allowances theyneed to generate electricity. Nevertheless, in accordance with Article 10c of Directive
2003/87/EC, some Member States have the option to provide transitional free allocation
for the modernisation of the energy sector for the period 2021 to 2030. Three Member
States have chosen to use this option. Given the need for rapid decarbonisation,
especially in the energy sector, the Member States concerned should only be able toprovide this transitional free allocation for investments carried out until 31 December
2024. They should be able to add any remaining allowances for the period 2021 to 2030
that are not used for such investments, in the proportion they determine, to the total
quantity of allowances that the Member State concerned receives for auctioning, or use
them to support investments within the framework of the Modernisation Fund. With the
exception of the deadline for notification thereof, allowances transferred to theModernisation Fund should be subject to the same rules concerning investments that are
applicable to the allowances already transferred pursuant to Article 10d(4) of Directive
2003/87/EC. To ensure predictability and transparency with regard to the volumes ofallowances either available for auctioning or for the transitional free allocation, andwith regard to the assets managed by the Modernisation Fund, Member States should
inform the Commission of the respective amounts of remaining allowances to be used
for each purpose by 15 May 2024.

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(38)

The scope of the Modernisation Fund should be aligned with the most recent climate
objectives of the Union by requiring that investments are consistent with the objectives of
the European Green Deal and Regulation (EU) 2021/1119, and eliminating the support toany investments related to energy-generation based on fossil fuels, except as regards the
support for such investments with revenue from allowances voluntarily transferred to
the Modernisation Fund in accordance with Article 10d(4) of the ETS Directive. In
addition, limited support for such investments should continue to be possible withrevenue from the allocations referred to in the third subparagraph of Article 10(1) of the
ETS Directive under certain conditions, in particular where the activity qualifies asenvironmentally sustainable under Regulation (EU) 2020/852 and as regards theallowances auctioned until 2027. For the latter category of allowances the downstream
uses of non-solid fossil fuels should, in addition, not be supported with revenue fromallowances auctioned after 2028. Furthermore, the percentage of the Modernisation Fundthat needs to be devoted to priority investments should be increased to 80 % for theModernisation Fund allowances transferred in accordance with Article 10d(4) of the
ETS Directive and referred to in the third subparagraph of Article 10(1) thereof, and to
90 % for the additional amount of 2,5 % from the Union-wide quantity of allowances.
Energy efficiency including in industry, transport, buildings, agriculture and waste;heating and cooling from renewable sources; as well as support of households to addressenergy poverty, including in rural and remote areas, should be included within the scope of
the priority investments. In order to increase transparency and better assess the impact of
the Modernisation Fund, the Investment Committee should report annually to the
Climate Change Committee on experience with the evaluation of investments, notably interms of emission reductions and abatement costs.

(38a)

Directive (EU) 2018/410 introduced provisions relating to the cancellation by Member
States of allowances from their auction volume in respect of closures of electricitygeneration capacity in their territory. In view of the increased climate ambition of theUnion and the resulting accelerated decarbonisation of the electricity sector, thiscancellation has become increasingly relevant. Therefore, the Commission should assess
whether the use by Member States of cancellation can be facilitated by amending therelevant delegated acts adopted pursuant to Article 10(4).

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(38b)

Adjustments to free allocation introduced in Directive 2018/410 and operationalized inCommission Implementing Regulation (EU) 2019/1842 improved the efficiency andincentives provided by free allocation, but increased the administrative work and madethe historical date of issuance of free allocation of 28 February not operational. In order
to better take into account the adjustments to free allocation, it is relevant to makeadjustments to the compliance cycle. The deadline for competent authorities to grant
free allocation should therefore be postponed from 28 February to 30 June and thedeadline for operators to surrender allowances should be postponed from 30 April to 30
September.

(39)

Commission Implementing Regulation (EU) 2018/206624 lays down rules on themonitoring of emissions from biomass which are consistent with the rules on the use of
biomass laid down in the Union legislation on renewable energy. As the legislation
becomes more elaborate on the sustainability criteria for biomass with the latest rules
established in Directive (EU) 2018/2001 of the European Parliament and of the Council25,
the conferral of implementing powers in Article 14(1) of Directive 2003/87/EC should be
explicitly extended to the adoption of the necessary adjustments for the application in the
EU ETS of sustainability criteria for biomass, including biofuels, bioliquids and biomass
fuels. In addition, the Commission should be empowered to adopt implementing acts tospecify how to account for the storage of emissions from mixes of zero-rated biomass andbiomass that is not from zero-rated sources.

24

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Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018 on themonitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of
the European Parliament and of the Council and amending Commission Regulation (EU)No 601/2012 (OJ L 334, 31.12.2018, p. 1).
Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December
2018 on the promotion of the use of energy from renewable sources (OJ L 328,
21.12.2018, p. 82).
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(40)

Renewable liquid and gaseous fuels of non-biological origin and recycled carbon fuels canbe important to reduce greenhouse gas emissions in sectors that are hard to decarbonise.
Where recycled carbon fuels and renewable liquid and gaseous fuels of non-biologicalorigin are produced from captured carbon dioxide under an activity covered by thisDirective, the emissions should be accounted under that activity. To ensure that renewablefuels of non-biological origin and recycled carbon fuels contribute to greenhouse gas
emission reductions and to avoid double counting for fuels that do so, it is appropriate to
explicitly extend the empowerment in Article 14(1) to the adoption by the Commission of
implementing acts laying down the necessary adjustments for how to account for the
eventual release of carbon dioxide, in a way that ensures that all emissions are accounted
for, including where such fuels are produced from captured carbon dioxide outside theUnion, while avoiding double counting and ensuring appropriate incentives are in place
for capturing emissions, taking also into account the treatment of these fuels underDirective (EU) 2018/2001.

(41)

As carbon dioxide is also expected to be transported by means other than pipelines, such as
by ship and by truck, the current coverage in Annex I to Directive 2003/87/EC fortransport of greenhouse gases for the purpose of storage should be extended to all means oftransport for reasons of equal treatment and irrespective of whether the means of transport
are covered by the EU ETS. Where the emissions from the transport are also covered byanother activity under Directive 2003/87/EC, the emissions should be accounted for underthat other activity to prevent double counting.

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(42)

The exclusion of installations using exclusively biomass from the EU ETS has led tosituations where installations combusting a high share of biomass have obtained windfall
profits by receiving free allowances greatly exceeding actual emissions. Therefore, athreshold value for zero-rated biomass combustion should be introduced above which
installations are excluded from the EU ETS. The introduction of a threshold will provide
more certainty as to which installations are under the ETS scope and will enable freeallowances to be more evenly distributed to sectors more at risk of carbon leakage inparticular. The threshold should be set at a 95 % level to balance the advantages anddisadvantages for installations to remain under the scope of the EU ETS. Therefore,
installations that have retained the physical capacity to burn fossil fuels, should not be
incentivised to revert to the use of such fuels. A threshold at 95 % ensures that if an
installation uses fossil fuels with the purpose of remaining within the scope of the ETS
to benefit from free allocation allowances, the carbon costs related to the use of thosefossil fuels will be sufficiently important to act as a disincentive. That threshold will also
ensure that installations using a sizeable quantity of fossil fuels will remain within themonitoring obligations of the EU ETS, thus avoiding potential circumvention of existing
monitoring, reporting and verification obligations. At the same time such installations
which combust a lower share of zero-rated biomass should continue to be encouraged,
through a flexible mechanism, to reduce fossil fuels combustion further while remaining
under the scope of the ETS until their use of sustainable biomass is so substantial thatthe inclusion under the ETS is no longer justified. In addition, past experience has
shown that the exclusion of installations exclusively using biomass, effectively being a
100 % threshold except for the combustion of fossil fuels during start-up and shut-downphases, requires a reassessment and more precise definition. The 95 % threshold allows
for the combustion of fossil fuels during start-up and shut-down phases.

(42a)

In order to incentivise the uptake of zero- and low-carbon technologies, Member Statesshould provide operators the option to remain in the scope of the EU ETS until the endof the current and next five year period referred to in Article 11(1) if the installation
changed its production process to reduce its greenhouse gas emissions and no longer
meets the threshold of 20 MW of total rated thermal input.

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(42b)The European Securities and Markets Authority (ESMA) published its final report on
emission allowances and associated derivatives on 28 March 2022. The report is acomprehensive analysis of the integrity of the European carbon market and has provided
expertise and recommendations in relation to upholding the proper functioning of the
carbon market. In order to continuously monitor market integrity and transparency, thereporting by ESMA should be conducted on a regular basis. ESMA is already assessing
market developments and, where necessary, providing recommendations in the area of
its competence in their report on trends, risks and vulnerabilities in accordance with
Article 32 (3) of Regulation (EU) No 1095/2010 of the European Parliament and of theCouncil26. Analysis of the European carbon market, which includes the auctions ofemission allowances, on- venue and over-the-counter trading in emission allowancesand derivatives thereof, should be part of this annual reporting. This obligation will
streamline the reporting done by ESMA and allow for cross-market comparisons, inparticular due to strong linkages between the ETS and commodity derivative markets.
This regular analysis should in particular monitor any market volatility and priceevolution, the operation of the auctions and trading operations on the markets, liquidity
and the volumes traded, and the categories and trading behaviour of market
participants, including speculative activity significantly impacting on prices. The
assessment should, where relevant, include recommendations to improve market
integrity and transparency as well as reporting obligations, and to enhance theprevention and detection of market abuse and help in maintaining orderly markets foremission allowances and derivatives thereof. The Commission should take due accountof the assessments and recommendations in the context of the annual carbon market
report and, where necessary, in the reports to ensure the better functioning of the carbon
market.

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Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24
November 2010 establishing a European Supervisory Authority (European Securities
and Markets Authority), amending Decision No 716/2009/EC and repealing Commission
Decision 2009/77/EC (OJ L 331, 15.12.2010).
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(42c)In order to further incentivise investments required for the decarbonisation of district
heating and to address social aspects related to high energy prices and the highgreenhouse gas emission intensity of district heating installations, in Member Stateswith a very high share of emissions from district heating in comparison with the size ofthe economy, operators should be able to apply for additional transitional free allocation
to district heating installations in such Member States and the additional value of thefree allocation be invested to significantly reduce emissions before 2030. To ensure these
reductions take place, the additional transitional free allocation should be conditional toinvestments made and to emissions reductions achieved as laid down in climate
neutrality plans to be drawn up by operators for their relevant installations.

(42d)

Unexpected or sudden excessive price increases in the carbon market can negatively
affect market predictability, which is essential for the planning of decarbonisation
investments. Therefore, the measure which applies in the event of excessive pricefluctuations in the market for emissions covered under Chapters II and III of Directive
2003/87/EC, should be strengthened in a careful manner to improve its reactivity tounwarranted price evolutions. If the concrete triggering conditions based on the increasein the average allowance price are met, this rule-based safeguard measure should betriggered automatically, whereby a predetermined number of allowances will be released
from the Market Stability Reserve. The triggering conditions should be closely monitoredby the Commission and published monthly in order to improve transparency. To ensure
the orderly auctioning of the allowances released from the Market Stability Reserve
pursuant to this safeguard measure and to improve market predictability, this measure
should not apply again until at least twelve months after the end of the previous releaseof allowances in the market under the measure.

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(43)

The Communication of the Commission on Stepping up Europe’s 2030 climate ambition27,
underlined the particular challenge to reduce the emissions in the sectors of road transportand buildings. Therefore, the Commission announced that a further expansion of emissions
trading could include emissions from road transport and buildings while indicating thatcovering all emissions of fuel combustion would present important benefits. Emissions
trading should be applied to fuels used for combustion in buildings, road transport andindustrial activities not covered by Annex I of Directive 2003/87/EC, such as heating ofindustrial facilities. For these ▌sectors, a separate but adjacent emissions trading systemshould be established to avoid any disturbance of the well-functioning emissions trading
system for stationary installations and aviation. The new system is accompanied bycomplementary policies ▌ shaping expectations of market participants and aiming for a
carbon price signal for the whole economy while providing measures to avoid undue priceimpacts. Previous experience has shown that the development of the new system requires
setting up an efficient monitoring, reporting and verification system. In view of ensuringsynergies and coherence with the existing Union infrastructure for the EU ETS▌, it isappropriate to set up emissions trading for the road transport, buildings and additional
sectors via an amendment to Directive 2003/87/ЕC.

(44)

In order to establish the necessary implementation framework and to provide a reasonable
timeframe for reaching the 2030 target, emissions trading in the ▌new sectors should startin 2025. During the first years, the regulated entities should be required to hold agreenhouse gas emissions permit and to report their emissions for the years 2024 to 2026.
The issuance of allowances and compliance obligations for these entities should beapplicable as from 2027. This sequencing will allow starting emissions trading in the
sectors in an orderly and efficient manner. It would also allow the ▌measures to be in place
to ensure a socially fair introduction of the EU emissions trading into the new sectors so as
to mitigate the impact of the carbon price on vulnerable households and transport users.

27

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COM(2020)562 final.
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(45)

Due to the very large number of small emitters in the new sectors▌, it is not possible toestablish the point of regulation at the level of entities directly emitting greenhouse gases,
as is the case for stationary installations and aviation. Therefore, for reasons of technicalfeasibility and administrative efficiency, it is more appropriate to establish the point ofregulation further upstream in the supply chain. The act that triggers the complianceobligation under the new emissions trading should be the release for consumption of fuels
which are used for combustion in the sectors of buildings and road transport, including for
combustion in road transport of greenhouse gases for geological storage, as well as in the
additional sectors, which correspond to industrial activities not covered by Annex I of
Directive 2003/87/EC. To avoid double coverage, the release for consumption of fuels
which are used in ▌activities under Annex I to that Directive ▌should not be covered.

(46)

The regulated entities in the ▌new sectors and the point of regulation should be defined inline with the system of excise duty established by Council Directive (EU) 2020/26228, with
the necessary adaptations, as that Directive already sets a robust control system for all
quantities of fuels released for consumption for the purposes of paying excise duties. Endusers of fuels in those sectors should not be subject to obligations under Directive
2003/87/EC.

(47)

The regulated entities falling within the scope of the emissions trading in the new sectors▌should be subject to similar greenhouse gas emissions permit requirements as theoperators of stationary installations. It is necessary to establish rules on permit
applications, conditions for permit issuance, content, and review, and any changes related
to the regulated entity. In order for the new system to start in an orderly manner, Member
States should ensure that regulated entities falling within the scope of the new emissions
trading have a valid permit as of the start of the system in 2025.

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Council Directive (EU) 2020/262 of 19 December 2019 laying down the generalarrangements for excise duty (OJ L 58, 27.2.2020, p. 4).
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(48)

The total quantity of allowances for the new emissions trading system should follow a
linear trajectory to reach the 2030 emissions reduction target, taking into account the costefficient contribution of buildings and road transport of 43 % emission reductions by 2030
compared to 2005 and of the additional sectors, a combined cost-efficient contribution of
42 % emission reductions by 2030 compared to 2005. The total quantity of allowances
should be established for the first time in 2027, to follow a trajectory starting in 2024 fromthe value of the 2024 emissions limits▌, calculated in accordance with Article 4(2) ofRegulation (EU) 2018/842 of the European Parliament and of the Council29 on the basis of
the reference emissions for the covered sectors for 2005 and the period from 2016 to 2018as determined under Article 4(3) of that Regulation. Accordingly, the linear reduction
factor should be set at 5,10 %. From 2028, the total quantity of allowances should be set on
the basis of the average reported emissions for the years 2024, 2025 and 2026, and should
decrease by the same absolute annual reduction as set from 2024, which corresponds to a
5,38 % linear reduction factor compared to the comparable 2025 value of the above
defined trajectory. If those emissions are significantly higher than this trajectory value andif this divergence is not due to small-scale differences in emission measurement
methodologies, the linear reduction factor should be adjusted to reach the required
emissions reduction in 2030.

(49)

The auctioning of allowances is the simplest and the most economically efficient method
for allocating emission allowances, which also avoids windfall profits. Both the buildings
and road transport sectors are under relatively small or non-existent competitive pressure
from outside the Union and are not exposed to a risk of carbon leakage. Therefore,
allowances for buildings and road transport should only be allocated via auctioning without
there being any free allocation.

29

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Regulation (EU) 2018/842 of the European Parliament and of the Council of 30 May 2018
on binding annual greenhouse gas emission reductions by Member States from 2021 to2030 contributing to climate action to meet commitments under the Paris Agreement andamending Regulation (EU) No 525/2013 (OJ L 156, 19.6.2018, p. 26).
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(50)

In order to ensure a smooth start of the new emissions trading system and taking into
account the need of the regulated entities to hedge or buy ahead allowances to mitigate
their price and liquidity risk, a higher amount of allowances should be auctioned early on.
In 2027, the auction volumes should therefore be 30 % higher than the total quantity ofallowances for 2027. This amount would be sufficient to provide liquidity, both ifemissions decrease in line with reduction needs, and in the event emission reductions only
materialise progressively. The detailed rules for this front-loading of auction volume are tobe established in a delegated act related to auctioning, adopted pursuant to Article 10(4) of
Directive 2003/87/EC.

(51)

The distribution rules on auction shares are highly relevant for any auction revenues thatwould accrue to the Member States, especially in view of the need to strengthen the abilityof the Member States to address the social impacts of a carbon price signal in the buildings
and road transport sectors. Notwithstanding the fact that the new sectors have very
different characteristics, it is appropriate to set a common distribution rule similar to theone applicable to stationary installations. The main part of allowances should be
distributed among all Member States on the basis of the average distribution of theemissions in road transportation, commercial and institutional buildings and residentialbuildings, during the period from 2016 to 2018.

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(52)

The introduction of the carbon price in road transport and buildings should beaccompanied by effective social compensation, especially in view of the already existinglevels of energy poverty. About 34 million Europeans, nearly 6,9 % of the Union
population, have said that they cannot afford to heat their home sufficiently in a 2021 EUwide survey▌. To achieve an effective social and distributional compensation, Member
States should be required to spend the auction revenues from emissions trading for thebuildings, road transport and additional sectors on the climate and energy-related
purposes already specified for the existing emissions trading, giving priority to activities
that can contribute to address social aspects of the emission trading in the new sectors,
or for measures added specifically to address related concerns for the new sectors ▌,including related policy measures under Directive 2012/27/EU ▌. A new Social Climate
Fund will provide dedicated funding to Member States to support the ▌most affectedvulnerable groups, especially households in energy or transport poverty. This Fund will
promote fairness and solidarity between and within Member States while mitigating therisk of energy and transport poverty during the transition. It will build on and complement
existing solidarity mechanisms, in synergy with other EU spending programmes andFunds. 50 million allowances of the EU ETS pursuant to Article 10a(8b) and 150
million allowances from emissions trading in the buildings, road transport andadditional sectors, and revenue generated from the auctioning of allowances concerning
the new sectors, up to EUR 65 000 000 000 altogether, should be used for the financingof the Social Climate Fund in the form of external assigned revenue on a temporary andexceptional basis, pending the discussions and deliberations on the Commission’s
proposal 2021/0430 for a Council Decision amending Decision (EU, Euratom)
2020/2053 on the system of own resources of the European Union of 22 December 2021
concerning the establishment of a new own resource based on ETS in accordance with
Article 311(3) TFEU. It is necessary to provide that in case a decision is adopted inaccordance with Article 311(3) TFEU establishing that new own resource, the same
revenue should cease to be externally assigned when such a decision enters into force.
With regard to the SCF, the Commission is in case of adoption of such a decision, topresent, as appropriate, the necessary proposals in accordance with Article 24(5a) of the
SCF Regulation. This is without prejudice to the outcome of the post 2027 Multiannual
Financial Framework negotiations.

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(53)

Reporting on the use of auctioning revenues should be aligned with the current reporting
established by Regulation (EU) 2018/1999 of the European Parliament and of theCouncil30.

▌(55)

Regulated entities covered by the new emissions trading should surrender allowances fortheir verified emissions corresponding to the quantities of fuels they have released for
consumption. They should surrender allowances for the first time for their verified
emissions in 2027. In order to minimise the administrative burden, a number of rules
applicable to the existing emissions trading system for stationary installations and aviation
should be made applicable to the new emissions trading for buildings, road transport andadditional sectors, with the necessary adaptations. This includes, in particular, rules ontransfer, surrender and cancellation of allowances, as well as the rules on the validity ofallowances, penalties, competent authorities and reporting obligations of Member States.

(55a)

Certain Member States already have national carbon taxes that apply to the buildings,
road transport and additional sectors covered by Annex III to Directive 2003/87/EC.
Therefore, a temporary derogation should be introduced until the end of 2030. To
ensure the objectives of Directive 2003/87/EC and the coherence of the new emissions
trading system, the option to apply that derogation should only be available where thenational tax rate is higher than the average auctioning price for the relevant year andonly apply to the surrender obligation of the regulated entities paying such a tax. To
ensure stability and transparency of the system, the national tax, including the relevant
tax rates, should be notified to the Commission at the end of the transposition period of
this Directive. The derogation should not affect the externally assigned revenue for theSocial Climate Fund or, if established in accordance with Article 311(3) TFEU, an own
resource based on the auctioning revenue from the ETS in the buildings, road transport
and additional sectors.

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Regulation (EU) 2018/1999 of the European Parliament and of the Council of 11
December 2018 on the Governance of the Energy Union and Climate Action, amending
Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of
the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU,
2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council
Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013of the European Parliament and of the Council (OJ L 328, 21.12.2018, p. 1).
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(56)

For emissions trading in the buildings, road transport and additional sectors to beeffective, it should be possible to monitor emissions with high certainty and at reasonable
cost. Emissions should be attributed to regulated entities on the basis of fuel quantities
released for consumption and combined with an emission factor. Regulated entities shouldbe able to reliably and accurately identify and differentiate the sectors in which the fuels
are released for consumption, as well as the final users of the fuels, in order to avoid
undesirable effects, such as double burden. In the small number of cases where double
counting between emissions in the existing ETS and the new system for the roadtransport, buildings and additional sectors cannot be excluded, or where costs arise due
to surrender of allowances for emissions outside activities included in this Directive,
Member States should use such revenue to compensate for the unavoidable double
counting or other such costs outside the road transport, building and additional sectors
in accordance with Union law and implementing powers should therefore be conferredon the Commission to ensure uniform conditions. To further mitigate any issues ofdouble counting, the deadlines for monitoring and surrendering in the new emission
trading system should come one month after the deadlines in the existing system forstationary installations and aviation. To have sufficient data to establish the total numberof allowances for the period from 2028 to 2030, the regulated entities holding a permit at
the start of the system in 2025 should report their associated historical emissions for 2024.

(56a)

Transparency on carbon costs and to which extent they are passed on to consumers is of
key importance for enabling swift and cost-efficient emission reductions in all sectors of
the economy. This is of particular importance in an emission trading system which isbased on upstream obligations. The new emissions trading is meant to incentivise
regulated entities to reduce the carbon content of the fuels and they should not makeundue profits by passing on more carbon costs to consumers than they incur. While fullauctioning of emissions allowances under the emissions trading system for buildings,
road transport and additional sectors already limits the occurrence of such undue
profits, the Commission should monitor the extent to which regulated entities passthrough carbon costs so that windfall profits are avoided. In relation to Chapter IVa, theCommission should report annually where possible by type of fuel on the average levelof the carbon costs which have been passed on to European consumers.

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(57)

It is appropriate to introduce measures to address the potential risk of excessive priceincreases, which, if particularly high at the start of the new emissions trading, may
undermine the readiness of households and individuals to invest in reducing theirgreenhouse gas emissions. These measures should complement the safeguards provided by
the Market Stability Reserve established by Decision (EU) 2015/1814 of the European
Parliament and of the Council31 and that became operational in 2019. While the market
will continue to determine the carbon price, safeguard measures will be triggered by rulesbased automatism, whereby allowances will be released from the Market Stability Reserve
only if concrete triggering conditions based on the increase in the average allowance priceare met. This additional mechanism should also be highly reactive, in order to address
excessive volatility due to factors other than changed market fundamentals. The measures
should be adapted to different levels of excessive price increase, which will result indifferent degrees of the intervention. The triggering conditions should be closely monitoredby the Commission and the measures should be adopted by the Commission as a matter ofurgency when the conditions are met. This is without prejudice to any accompanying
measures that Member States may adopt to address adverse social impacts.

(57a)

In order to increase certainty for citizens that the carbon price in the initial years of the
new emissions trading system does not go above EUR 45, it is appropriate to include an
additional price stability mechanism to release allowances from the Market Stability
Reserve in case the carbon price exceeds that level. In principle, the measure should
apply once during a period of 12 months. However, it should also be able to apply again
during the same period of 12 months in case the Commission, assisted by the Climate
Change Committee, considers that the evolution of the price justifies another release ofallowances. In view of the aim of this mechanism to ensure stability in the initial years,
the Commission should assess its functioning and whether it should be continued after
2029.

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Decision (EU) 2015/1814 of the European Parliament and of the Council of 6 October
2015 concerning the establishment and operation of a market stability reserve for theUnion greenhouse gas emission trading scheme and amending Directive 2003/87/EC (OJ L
264, 9.10.2015, p. 1).
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(57b)As an additional safeguard mechanism ahead of the start of emissions trading inbuildings, road transport and additional sectors, it should be possible to delay theapplication of the cap and the surrendering obligations in case gas or oil wholesale
prices are exceptionally high compared to historical trends. The mechanism should be
automatic, whereby the application of the cap and the surrendering obligations should
be delayed by one year if concrete energy price triggers are met. The reference prices
should be determined on the basis of benchmark contracts in the gas and oil wholesalemarkets which are immediately available and the most relevant for end consumers.
Separate trigger conditions for gas and oil prices should be envisaged, as their pricedevelopments follow different historical trends. In order to ensure market certainty, theCommission should provide clarity on the application of the delay sufficiently in advancethrough a notice in the Official Journal.

(58)

The application of emissions trading in the buildings, road transport and additional sectors
should be monitored by the Commission, including the degree of price convergence withthe existing ETS, and, if necessary, a review should be proposed to the European
Parliament and the Council to improve the effectiveness, administration and practicalapplication of emissions trading for those sectors on the basis of acquired knowledge aswell as increased price convergence. The Commission should be required to submit thefirst report on those matters by 1 January 2028.

(59)

In order to ensure uniform conditions for the implementation of Articles 3g(1a), 3gd(2),3gd(3), 10b(4), 12(3-d), 12(3-c), 14(1), 30f(2a), 30f(4) and 30h(4) of Directive
2003/87/EC, implementing powers should be conferred on the Commission. To ensure
synergies with the existing regulatory framework, the conferral of implementing powers in
Articles 14 and 15 of that Directive should be extended to cover the ▌road transport,
buildings and additional sectors. Those implementing powers should be exercised inaccordance with Regulation (EU) No 182/2011 of the European Parliament and of theCouncil32.

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Regulation (EU) No 182/2011 of 16 February 2011 laying down the rules and generalprinciples concerning mechanisms for control by the Member States of the Commission's
exercise of implementing powers (OJ L 55, 28.02.2011, p. 13).
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(59a)In order to achieve the objectives laid down in this Directive and other Union legislation,
particularly those in Regulation (EU) 2021/1119, the Union and its Member Statesshould make use of the latest scientific evidence while implementing policies. Therefore,
when the Scientific Advisory Board on Climate Change provides scientific advice andissues reports regarding the EU ETS, the Commission should take those into account, inparticular, as regards the need for additional Union policies and measures to ensurecompliance with the objectives and targets of Regulation (EU) 2021/1119, and additional
Union policies and measures in view of the ambition and environmental integrity of
global market-based measures for aviation and maritime transport.

(59b)

To acknowledge the contribution of EU ETS revenues to the climate transition, an EU
ETS label should be introduced. Among other measures to ensure the visibility offunding from the EU ETS, Member States and the Commission should ensure thatprojects and activities supported through the Modernisation Fund and the Innovation
Fund are clearly indicated as coming from EU ETS revenues by displaying anappropriate label.

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(59c)

With a view to achieving the climate-neutrality objective set out in Article 2(1) ofRegulation (EU) 2021/1119, a Union-wide climate target for 2040 should be set, basedon a proposal from the Commission. The EU ETS should be reviewed to align it with theUnion 2040 climate target. As a result, by July 2026 the Commission should report on
several aspects of the EU ETS to the European Parliament and to the Council,
accompanying the report, where appropriate, by a legislative proposal and impact
assessment. In line with Regulation (EU) 2021/1119, priority should be given to directemissions reductions, which will have to be complemented by increased CO2 removals inorder to achieve climate neutrality. Therefore, among other aspects, by July 2026 theCommission should report to the European Parliament and to the Council on how
emissions removed from the atmosphere and safely and permanently stored, for example
through direct air capture, could potentially be covered by emissions trading, without
offsetting necessary emissions reductions. For as long as not all stages of the life of a
product in which captured carbon is used are subject to carbon pricing, in particular at
the stage of waste incineration, reliance on accounting of emissions at the point of theirrelease from products into the atmosphere would result in emissions being
undercounted. In order to regulate the capture of carbon in a way that reduces net
emissions, ensures that all emissions are accounted for and that double counting is
avoided, while generating economic incentives, the Commission should assess by July
2026, whether all greenhouse gas emissions covered by Directive 2003/87/EC are
effectively accounted for, and whether double counting is effectively avoided. In
particular, it should assess the accounting of the greenhouse gas emissions which areconsidered to have been captured and utilised in a product in a way other than thatreferred to in paragraph 3b of Article 12 and take into account the downstream stages,
including disposal and waste incineration. Finally, the Commission should also reporton to the Council and the European Parliament on the feasibility of lowering the 20 MW
total rated thermal input thresholds for the activities in Annex I of Directive 2003/87/EC,
taking into account the environmental benefit and administrative burden.

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(59d)

By July 2026, the Commission should also assess and report to the European Parliament
and to the Council on the feasibility of including municipal waste incineration
installations in the EU ETS, including with a view to their inclusion from 2028 and withan assessment of the potential need for a possibility for a Member State to opt out until
the end of 2030, taking into account the importance of all sectors contributing toemission reductions. Inclusion of municipal waste incineration installations in the EU
ETS would contribute to the circular economy by encouraging recycling, reuse andrepair of products, while also contributing to economy-wide decarbonisation. The
inclusion of municipal waste incineration installations would reinforce incentives forsustainable management of waste in line with the waste hierarchy and would create alevel playing field between the regions that have included municipal waste incineration
under the scope of the EU ETS. To avoid deviation of waste from municipal waste
incineration installations towards landfills in the Union, which create methane
emissions, and exports of waste to third countries, with a potentially negative impact on
the environment, in its report the Commission should take into account the potential
diverting towards disposal of waste by landfilling in the Union and waste exports to third
countries. The Commission should also take into account the effects on the internalmarket, potential distortions of competition, environmental integrity, alignment with theobjectives of the Waste Framework Directive and robustness and accuracy with respect
to the monitoring and calculation of emissions. Considering the methane emissions fromlandfilling and to avoid creating an uneven playing field, the Commission should also
assess the possibility of including other waste management processes, such as
landfilling, fermentation, composting and mechanical-biological treatment, in the EU
ETS, when assessing the feasibility of including municipal waste incineration
installations.

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(60)

In order to adopt non-legislative acts of general application to supplement or amend certain
non-essential elements of a legislative act, the power to adopt acts in accordance with
Article 290 of the Treaty on the Functioning of the European Union should be delegated to
the Commission in respect of Articles 10(4), 10a(8), 10a(8a), 12(3b), and 30j of that
Directive. Moreover, to ensure synergies with the existing regulatory framework, thedelegation in Article 10(4) ▌of Directive 2003/87/EC should be extended to cover thesectors of road transport and buildings. It is of particular importance that the Commission
carry out appropriate consultations during its preparatory work, including at expert level,
and that those consultations be conducted in accordance with the principles laid down in
the Interinstitutional Agreement on Better Law-Making of 13 April 2016. In particular, toensure equal participation in the preparation of delegated acts, the European Parliament
and the Council receive all documents at the same time as Member States' experts, andtheir experts systematically have access to meetings of Commission expert groups dealing
with the preparation of delegated acts.

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(60a)The provisions relating to the existing EU ETS and its extension to maritime transportshould apply from 2024 in line with the need for urgent climate action and for all sectors
to contribute to emission reductions in a cost-effective manner. Consequently, Member
States should transpose the provisions relating to those sectors by 31 December 2023 at
the latest. However, the deadline for transposing the provisions relating to the emissions
trading system for buildings, road transport and additional sectors should be 30 June
2024, as the rules on monitoring, reporting, verification and permitting for those sectors
apply from 1 January 2025, and require sufficient lead time for orderly implementation.
As an exception, to guarantee transparency and robust reporting, Member States should
transpose the obligation to report on historical emissions for those sectors by
31 December 2023, as this obligation relates to the emissions of the year 2024. In
accordance with the Joint Political Declaration of 28 September 2011 of Member States
and the Commission on explanatory documents33, Member States have undertaken toaccompany, in justified cases, the notification of their transposition measures with one
or more documents explaining the relationship between the components of a directive
and the corresponding parts of national transposition instruments. With regard to thisDirective, the legislator considers the transmission of such documents to be justified.

33

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(61)

A well-functioning, reformed EU ETS comprising an instrument to stabilise the market is a
key means for the Union to achieve the economy-wide net greenhouse gas emissions
reduction target for 2030, the Union’s climate-neutrality objective by 2050, at the latest,
and the aim of achieving negative emissions thereafter as laid down in Article 2(1) ofRegulation (EU) 2021/1119 and the goal of the Paris Agreement. The Market Stability
Reserve seeks to address the imbalance between supply and demand of allowances in themarket. Article 3 of Decision (EU) 2015/1814 provides that the reserve is to be reviewed
three years after it becomes operational, paying particular attention to the percentage figure
for the determination of the number of allowances to be placed in the Market Stability
Reserve, the threshold for the total number of allowances in circulation (TNAC) that
determines the intake of allowances, and the number of allowances to be released from thereserve. The current threshold determining the placing of allowances in the Market
Stability Reserve was established in 2018, with the last review of the EU ETS, while thelinear reduction factor is being increased with this Directive. Therefore, as part of theregular review of the functioning of the Market Stability Reserve, the Commission
should also assess the need for a potential adjustment of this threshold, in line with thelinear factor referred to in Article 9 of Directive 2003/87/EC.

(62)

Considering the need to deliver a stronger investment signal to reduce emissions in a costefficient manner and with a view to strengthening the EU ETS, Decision (EU) 2015/1814
should be amended so as to increase the percentage rate for determining the number ofallowances to be placed each year in the Market Stability Reserve. In addition, for lower
levels of the TNAC, the intake should be equal to the difference between the TNAC andthe threshold that determines the intake of allowances. This would prevent the considerable
uncertainty in the auction volumes that results when the TNAC is close to the threshold,and at the same time ensure that the surplus reaches the volume bandwidth within which
the carbon market is deemed to operate in a balanced manner.

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(63)

Furthermore, in order to ensure that the level of allowances that remains in the Market
Stability Reserve after the invalidation is predictable, the invalidation of allowances in thereserve should no longer depend on the auction volumes of the previous year. The numberof allowances in the reserve should, therefore, be fixed at a level of 400 million
allowances, which corresponds to the lower threshold for the value of the TNAC.

(64)

The analysis of the impact assessment accompanying the proposal for this Directive has
also shown that net demand from aviation should be included in the total number ofallowances in circulation. In addition, since aviation allowances can be used in the same
way as general allowances, including aviation in the reserve would make it a moreaccurate, and thus a better tool to ensure the stability of the market. The calculation of thetotal number of allowances in circulation should include aviation emissions and allowances
issued in respect of aviation as of the year following the entry into force of this Directive.

(65)

To clarify the calculation of the total number of allowances in circulation (TNAC),
Decision (EU) 2015/1814 should specify that only allowances issued and not put in theMarket Stability Reserve are included in the supply of allowances. Moreover, the formula
should no longer subtract the number of allowances in the Market Stability Reserve fromthe supply of allowances. This change would have no material impact on the result of thecalculation of the TNAC, including on the past calculations of the TNAC or on the reserve.

(66)

In order to mitigate the risk of supply and demand imbalances associated with the start ofemissions trading for the buildings, road transport and additional sectors, as well as torender it more resistant to market shocks, the rule-based mechanism of the Market Stability
Reserve should be applied to those new sectors. For that reserve to be operational from thestart of the system, it should be established with an initial endowment of 600 million
allowances for emissions trading in the road transport, buildings and additional sectors.
The initial lower and upper thresholds, which trigger the release or intake of allowancesfrom the reserve, should be subject to a general review clause. Other elements such as the
publication of the total number of allowances in circulation or the quantity of allowances
released or placed in the reserve should follow the rules of the reserve for other sectors.

▌

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(67a)

Since the objectives of this Directive to promote reductions of greenhouse gas emissions
in a cost-effective and economically efficient way in a manner commensurate with thiseconomy-wide net greenhouse gas emissions reduction target for 2030 through an
extended and amended Union wide market based mechanism cannot be sufficiently
achieved by the Member States but can rather, by reason of its scale and effects, bebetter achieved at Union level, the Union may adopt measures, in accordance with theprinciple of subsidiarity as set out in Article 5 of the Treaty on European Union. In
accordance with the principle of proportionality as set out in that Article, this Directive
does not go beyond what is necessary in order to achieve those objectives.

(68)

Directive 2003/87/EC and Decision (EU) 2015/1814 ▌should therefore be amended
accordingly,

HAVE ADOPTED THIS DIRECTIVE:

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Article 1
Amendments to Directive 2003/87/EC
Directive 2003/87/EC is amended as follows:(-1)

in Article 1, the second paragraph is replaced by the following:“This Directive also provides for the reductions of greenhouse gas emissions to be
increased so as to contribute to the levels of reductions that are considered scientificallynecessary to avoid dangerous climate change. It contributes to the achievement of theUnion’s climate-neutrality objective and its climate targets as laid down in Regulation(EU) 2021/1119 and thereby to the objectives of the Paris Agreement.”;(1)

in Article 2, paragraphs 1 and 2 are replaced by the following:“1.

This Directive shall apply to the activities listed in Annexes I and III, and to the▌greenhouse gases listed in Annex II. Where an installation that is included in thescope of the EU ETS due to the operation of combustion units with a total rated
thermal input exceeding 20 MW changes its production processes to reduce its
greenhouse gas emissions and no longer meets that threshold, the Member State
shall provide the operator with the options to remain in the scope of the EU ETS
until the end of the current and next five year period referred to in Article 11(1),second subparagraph, following the change to its production process. The operatorof that installation may decide that the installation remains in the scope of the EU
ETS until the end of that current five year period only or also in the next five year
period, following the change to its production process. The Member State
concerned shall notify to the Commission changes compared to the list submitted
to the Commission pursuant to Article 11(1).

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2.

This Directive shall apply without prejudice to any requirements pursuant to
Directive 2010/75/EU of the European Parliament and of the Council(*).
_________(*)

Directive 2010/75/EU of the European Parliament and of the Council of 24
November 2010 on industrial emissions (integrated pollution prevention and control)(OJ L 334, 17.12.2010, p. 17).”;(2)

Article 3 is amended as follows:(a)point (b) is replaced by the following:“(b) ‘emissions’ means the release of greenhouse gases from sources in an
installation or the release from an aircraft performing an aviation activity listed
in Annex I or from ships performing a maritime transport activity listed in
Annex I of the gases specified in respect of that activity, or the release ofgreenhouse gases corresponding to the activity referred to in Annex III;”;(b)

point (d) is replaced by the following:“(d) ‘greenhouse gas emissions permit’ means the permit issued in accordance with
Articles 5, 6 and 30b;”;(c)6210/23
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point (u) is deleted;

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(d)

the following points (v) to (z) are added:“(v) ‘shipping company’ means the shipowner or any other organisation or person,
such as the manager or the bareboat charterer, that has assumed the
responsibility for the operation of the ship from the shipowner and that, on
assuming such responsibility, has agreed to take over all the duties andresponsibilities imposed by the International Management Code for the Safe
Operation of Ships and for Pollution Prevention, set out in Annex I to
Regulation (EC) No 336/2006 of the European Parliament and of theCouncil(*);_________(*)

Regulation (EC) No 336/2006 of the European Parliament and of the Councilof 15 February 2006 on the implementation of the International Safety
Management Code within the Community and repealing Council Regulation(EC) No 3051/95 (OJ L 64, 4.3.2006, p. 1).

(va) ‘voyage’ means a voyage as defined in Article 3, point (c), of Regulation(EU) 2015/757 of the European Parliament and of the Council(*);_________(*)

Regulation (EU) 2015/757 of the European Parliament and of the Council of
29 April 2015 on the monitoring, reporting and verification of carbon dioxide
emissions from maritime transport, and amending Directive 2009/16/EC (OJ
L 123, 19.5.2015, p. 55).

(w) ‘administering authority in respect of a shipping company’ means the authority
responsible for administering the EU ETS in respect of a shipping company inaccordance with Article 3gd;

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(wa) ‘port of call’ means the port where a ship stops to load or unload cargo or toembark or disembark passengers, or the port where an offshore ship stops torelieve the crew, considering that stops for the sole purposes of refuelling,obtaining supplies, relieving the crew of a ship other than an offshore ship,
going into dry-dock or making repairs to the ship and/or its equipment, stops
in port because the ship is in need of assistance or in distress, ship-to-shiptransfers carried out outside ports, stops for the sole purpose of taking shelter
from adverse weather or rendered necessary by search and rescue activities,
and stops of containerships in a neighbouring container transhipment port
listed in the implementing act adopted pursuant to Article 3g(1a) areexcluded;(wb) ‘cruise passenger ship’ means a passenger ship not having a cargo deck,
designed exclusively for commercial transportation of passengers inovernight accommodation on a sea voyage;(wc) ‘Contract for Difference (CD)’ means a contract between the Commission
and the producer of a low- or zero-carbon product who has been selected
through a competitive bidding mechanism such as an auction, whereby thecontract provides the producer with support from the Innovation Fundcovering the difference between the winning price (the strike price) on the
one hand and a reference price, as derived from the price of the produced
low- or zero-carbon product, the market price of a close substitute or a
combination of those two on the other hand;(wd) ‘Carbon Contract for Difference (CCD)’ means a contract between theCommission and the producer of a low- or zero-carbon product who has
been selected through a competitive bidding mechanism such as an auction,
whereby the contract provides the producer with support from the Innovation
Fund covering the difference between the winning price (the strike price) on
the one hand and a reference price, as derived from an average price of theallowances on the other hand;

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(we) ‘fixed premium contract’ means a contract between the Commission and the
producer of a low- or zero-carbon product who has been selected through acompetitive bidding mechanism such as an auction, whereby the contract
provides the producer with support in the form of a fixed amount per unit of
the produced product;(x)‘regulated entity’ for the purposes of Chapter IVa shall mean any natural or
legal person, except for any final consumer of the fuels, that engages in theactivity referred to in Annex III and that falls within one of the following
categories:(i)where the fuel passes through a tax warehouse as defined in Article 3(11)of Council Directive (EU) 2020/262(*), the authorised warehouse keeper
as defined in Article 3(1) of that Directive, liable to pay the excise duty
which has become chargeable pursuant to Article 7 of that Directive;(ii)

if point (i) is not applicable, any other person liable to pay the excise duty
which has become chargeable pursuant to Article 7 of Directive (EU)2020/262 or Article 21(5), first subparagraph, of Council Directive
2003/96/EC in respect of the fuels covered by this Chapter;(iii) if points (i) and (ii) are not applicable, any other person which has to beregistered by the relevant competent authorities of the Member State forthe purpose of being liable to pay the excise duty, including any person
exempt from paying the excise duty, as referred to in Article 21(5),fourth sub-paragraph, of Council Directive 2003/96/EC(**);(iv) if points (i), (ii) and (iii) are not applicable, or if several persons arejointly and severally liable for payment of the same excise duty, anyother person designated by a Member State.
_________(*)

Council Directive (EU) 2020/262 of 19 December 2019 laying down thegeneral arrangements for excise duty (OJ L 058 27.2.2020, p. 4).

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(**) Council Directive 2003/96/EC of 27 October 2003 restructuring theCommunity framework for the taxation of energy products and electricity(OJ L 283 31.10.2003, p. 51).
(y)‘fuel’ for the purposes of Chapter IVa shall mean any energy product referred
to in Article 2(1) of Directive 2003/96/EC, including the fuels listed in TableA and Table C of Annex I to that Directive ▌, as well as any other productintended for use, offered for sale or used as motor fuel or heating fuel as
specified in Article 2(3) of that Directive, including for the production ofelectricity;(z)‘release for consumption’ for the purposes of Chapter IVa shall have the same
meaning as in Article 6(3) of Directive (EU) 2020/262;(za) ‘TTF gas price’ for the purposes of Chapter IV shall mean the price of thegas futures month-ahead contract traded at the Title Transfer Facility (TTF)
Virtual Trading Point, operated by Gasunie Transport Services B.V.;(zb) ‘Brent crude oil price’ for the purposes of Chapter IV shall mean the futuresmonth-ahead price for crude oil used as a benchmark price for the purchasesof oil.”;(3)

the title of Chapter II is replaced by the following:“AVIATION AND MARITIME TRANSPORT”(4)

Article 3a is replaced by the following:“Article 3a
Scope
Articles 3b to 3f shall apply to the allocation and issue of allowances in respect of theaviation activities listed in Annex I. Articles 3g to 3ge shall apply in respect of themaritime transport activities listed in Annex I.”

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(5)

Articles 3f and 3g are replaced by the following:“Article 3f
Monitoring and reporting plans
The administering Member State shall ensure that each aircraft operator submits to thecompetent authority in that Member State a monitoring plan setting out measures tomonitor and report emissions ▌and that such plans are approved by the competentauthority in accordance with the acts referred to in Article 14.
Article 3g
Scope of application to maritime transport activities
1.

The allocation of allowances and the application of surrender requirements in respectof maritime transport activities shall apply in respect of fifty percent (50 %) of theemissions from ships performing voyages departing from a port of call under thejurisdiction of a Member State and arriving at a port of call outside the jurisdiction of
a Member State, fifty percent (50 %) of the emissions from ships performing voyage
departing from a port of call outside the jurisdiction of a Member State and arriving
at a port of call under the jurisdiction of a Member State, one hundred percent(100 %) of emissions from ships performing voyages departing from a port of callunder the jurisdiction of a Member State and arriving at a port of call under thejurisdiction of a Member State and one hundred percent (100 %) of emissions fromships within a port of call under the jurisdiction of a Member State.

1a.

The Commission shall by 31 December 2023 by means of implementing acts
establish a list of the neighbouring container transhipment ports and update thislist before 31 December every two years thereafter.

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Those implementing acts shall list neighbouring container transhipment ports
where the share of transhipment of containers, measured in twenty-foot equivalentunit, exceeds 65 % of the total container traffic of that port during the most recent
twelve-month period for which relevant data are available located outside theUnion but less than 300 nautical miles of a port under the jurisdiction of a Member
State. For the purpose of this paragraph containers shall be considered astranshipped when they are unloaded from a ship to the port for the sole purpose ofloading them on another ship. The list shall not include ports located in a third
country that effectively apply measures equivalent to this Directive.
Those implementing acts shall be adopted in accordance with the examination
procedure referred to in Article 22a(2).
2.

Articles 9, 9a and 10 shall apply to maritime transport activities in the same manneras they apply to other activities covered by the EU ETS with the following exception
with regard to the application of Article 10.
Until 31 December 2030, a share of allowances shall be attributed to Member
States with a ratio of shipping companies that would have been under their
responsibility according to Article 3gd compared to population in 2020 and basedon data available for the period 2018-2020, above 15 shipping companies per
million inhabitants. The quantity of allowances shall correspond to 3,5 % of theadditional quantity of allowances due to the increase in the cap for maritime
transport referred to in Article 9, third sub-paragraph in the relevant year. For theyears 2024 to 2026, the quantity of allowances shall in addition be multiplied by
the percentages applicable to the relevant year pursuant to Article 3ga, points (a)to (c). The revenue from the auctioning of this share of allowances should be used
for the purposes referred to in Article 10(3) point (g), with regard to the maritime
sector, and points (f) and (i). 50 % of the quantity of allowances shall be
distributed among the relevant Member States based on the share of shipping
companies under their responsibility and the remainder distributed in equal shares
between them.”

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(6)

the following Articles 3ga to 3ge are added:“Article 3ga
Phase-in of requirements for maritime transport
Shipping companies shall be liable to surrender allowances according to the following
schedule:(a)40 % of verified emissions reported for 2024 that would be subject to surrender
requirements in accordance with Article 12;(b)

70 % of verified emissions reported for 2025 that would be subject to surrender
requirements in accordance with Article 12;(c)

100 % of verified emissions reported for 2026 and each year thereafter inaccordance with Article 12.

▌
To the extent that fewer allowances are surrendered compared to the verified emissions
from maritime transport for the years ▌2024 and 2025, once the difference between
verified emissions and allowances surrendered has been established in respect of each year,
a corresponding quantity of allowances shall be cancelled rather than auctioned pursuant to
Article 10.
Article 3gaa
Provisions for transfer of the costs of the ETS from the shipping company to anotherentityMember States shall take the necessary measures to ensure that when the ultimate
responsibility for the purchase of the fuel and/or the operation of the ship is assumed bya different entity than the shipping company pursuant to a contractual arrangement, theshipping company is entitled to reimbursement from that entity for the costs arising fromthe surrender of allowances.

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Operation of the ship for the purposes of this Article means determining the cargo
carried and/or the route and the speed of the ship. The shipping company remains the
responsible entity for surrendering allowances as required under Article 3ga and Article
12 of this Directive and for overall compliance with the provisions of national law
transposing this Directive. Member States shall ensure that shipping companies under
their responsibility comply with their obligations to surrender allowances,notwithstanding their entitlement to be reimbursed by the commercial operators for thecosts arising from the surrender.
Article 3gb
Monitoring and reporting of emissions from maritime transport
In respect of emissions from maritime transport activities listed in Annex I, theadministering authority in respect of a shipping company shall ensure that a shipping
company under its responsibility monitors and reports the relevant parameters during areporting period, and submits aggregated emissions data at company level to theadministering authority in line with Chapter II of Regulation (EU) 2015/757 of theEuropean Parliament and of the Council (*).
_________(*)

Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April
2015 on the monitoring, reporting and verification of carbon dioxide emissions frommaritime transport, and amending Directive 2009/16/EC (OJ L 123, 19.5.2015, p.
55).

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Article 3gc
Verification and accreditation of emissions from maritime transport
The administering authority in respect of a shipping company shall ensure that thereporting of aggregated emissions data at shipping company level submitted by a shipping
company pursuant to Article 3gb is verified in accordance with the verification andaccreditation rules set out in Chapter III of Regulation (EU) 2015/757 (*).
_________(*)

Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April
2015 on the monitoring, reporting and verification of carbon dioxide emissions frommaritime transport, and amending Directive 2009/16/EC (OJ L 123, 19.5.2015, p.
55).

Article 3gd
Administering authority in respect of a shipping company
1.

The administering authority in respect of a shipping company shall be:(a)in the case of a shipping company registered in a Member State, the Member
State in which the shipping company is registered;(b)in the case of a shipping company that is not registered in a Member State, theMember State with the greatest estimated number of port calls from voyages
performed by that shipping company in the last four monitoring years andfalling within the scope set out in Article 3g;(c)in the case of a shipping company that is not registered in a Member State andthat did not carry out any voyage falling within the scope set out in Article 3gin the preceding four monitoring years, the administering authority shall be theMember State ▌where a ship of the shipping company has arrived or started
its first voyage falling within the scope set out in Article 3g.

▌

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2.

Based on the best available information, the Commission shall establish by means of
implementing acts:(a)before 1 February 2024, ▌ a list of shipping companies which performed amaritime activity listed in Annex I that fell within the scope defined in Article
3g on or with effect from 1 January 2024, specifying the administering
authority for each shipping company in accordance with paragraph 1;(b)before 1 February every two years thereafter, an updated list to reattributeshipping companies registered in a Member State to another administering
authority if they changed the Member State of registration within the Unionin accordance with paragraph 1(a) of this Article or to include shipping
companies which have subsequently performed a maritime activity listed in
Annex I that fell within the scope defined in Article 3g in accordance withparagraph 1(c) of this Article; and(c)before 1 February every four years thereafter, an updated list to reattributeshipping companies that are not registered in a Member State to anotheradministering authority in accordance with paragraph 1(b) of this Article.

2a.

The administering authority that according to the list established pursuant toparagraph 2 is responsible for a shipping company shall retain that responsibility
regardless of subsequent changes in the shipping company’s activities orregistration until those changes are reflected in an updated list.

3.

The Commission shall adopt implementing acts to establish detailed rules relating to
the administration of shipping companies by administering authorities under thisDirective. Those implementing acts shall be adopted in accordance with theexamination procedure referred to in Article 22a(2).

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Article 3ge
Reporting and review
1.

In the event of the adoption by the International Maritime Organization (IMO) of a
global market-based measure to reduce greenhouse gas emissions from maritime
transport, the Commission shall review this Directive in light of that adopted
measure.
To this end, the Commission shall present a report to the European Parliament
and to the Council within 18 months of the adoption of such a measure and before
it becomes operational. In that report the Commission shall examine the global
market-based measure as regards:(a)

its ambition in light of the objectives of the Paris Agreement;(b)

its overall environmental integrity, including compared to the provisions of
this Directive covering maritime transport; and(c)any issue related to the coherence between the EU ETS and that measure.

Where appropriate, the Commission may accompany that report with a legislative
proposal to amend this Directive in a manner that is consistent with the Union
2030 climate target and the climate-neutrality objective as set out in Regulation(EU) 2021/1119 and with the aim of preserving the environmental integrity andeffectiveness of Union climate action, to ensure coherence between theimplementation of a global market-based measure adopted by the IMO and the EU
ETS, while avoiding any significant double burden.

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1a.

In the event that the International Maritime Organization does not adopt by 2028 a
global market-based measure to reduce greenhouse gas emissions from maritime
transport in line with the objectives of the Paris Agreement and at least to a levelcomparable to that resulting from the Union measures taken under this Directive,
the Commission shall present a report to the European Parliament and to the Council
in which it shall examine the need to apply the allocation of allowances andsurrender requirements in respect of more than fifty percent (50 %) of theemissions from ships performing voyages between a port of call under thejurisdiction of a Member State and a port of call outside the jurisdiction of a
Member State, in light of the objectives of the Paris Agreement. In that report, theCommission shall in particular consider progress at IMO level and examine
whether any third country has a market-based measure equivalent to this Directive
and assess the risk of an increase in evasive practices, including through a shift toother modes of transport or a shift of port hubs to ports outside the Union.
Where appropriate, the report shall be accompanied by a legislative proposal toamend this Directive▌.

2.

The Commission shall monitor the implementation of this Chapter in relation tomaritime transport, in particular to detect evasive behaviour in order to prevent
this at an early stage, including consideration of outermost regions, and reportbiennially from [the year following the entry into force of this amending Directive]on the implementation of this Chapter and possible trends as regards companies
seeking to avoid being bound by the requirements of this Directive. The Commission
shall also monitor impacts as regards, inter alia, possible transport cost increases,
market distortions and changes in port traffic such as port evasion and shifts oftranshipment hubs, the overall competitiveness of the maritime sector in theMember States, and in particular impacts on those shipping services that provide
essential services of territorial continuity. If appropriate, the Commission shallpropose measures to ensure the effective implementation of this Chapter, inparticular measures to address these trends as regards companies seeking to evade
the requirements of this Directive.

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2a.

No later than 30 September 2028, the Commission shall assess the appropriatenessof extending the application of the second subparagraph of Article 3g(2) beyond 31
December 2030 and, if appropriate, submit a legislative proposal to that effect.

3.

No later than 31 December 2026, the Commission shall present a report to theEuropean Parliament and to the Council in which it shall examine the feasibility
and economic, environmental and social impacts of the inclusion in this Directiveof emissions from ships, including offshore ships, below 5000 gross tonnage but
not below 400 gross tonnage building notably on the analysis accompanying thereview of Regulation (EU) 2015/757 due by end of 2024.
That report shall also consider the interlinkages between this Directive andRegulation (EU) 2015/757 and draw on experiences from the application thereof.
In that report, the Commission shall also examine how this Directive can bestaccount for the uptake of renewable and low-carbon maritime fuels on a lifecycle
basis. If appropriate, the report may be accompanied by legislative proposals.”;(7)

Article 3h is replaced by the following:“Article 3h
Scope
The provisions of this Chapter shall apply to greenhouse gas emissions permits and theallocation and issue of allowances in respect of activities listed in Annex I other thanaviation and maritime transport activities.”;(8)

in Article 6(2), point (e) is replaced by the following:“(e) an obligation to surrender allowances equal to the total emissions of the installationin each calendar year, as verified in accordance with Article 15 and in accordancewith the deadline provided in Article 12(3).”;6210/23
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(9)

Article 8 is amended as follows:(a)the words “of the European Parliament and of the Council(1)” and footnote (1) aredeleted;(b)

the following paragraph is added:“The Commission shall review the effectiveness of synergies with Directive
2010/75/EU. Environmental and climate relevant permits should be coordinated toensure efficient and speedier execution of measures needed to comply with EU
climate and energy objectives. The Commission may submit a report to the European
Parliament and the Council in the context of any future review of this Directive.”;(10)in Article 9, the following paragraphs are added:“In 2024, the Union-wide quantity of allowances shall be decreased by 90 million
allowances ▌. In 2026, the Union-wide quantity of allowances shall be decreased by 27
million allowances ▌. In 2024, the Union-wide quantity of allowances shall be increased
by 78,4 million allowances for maritime transport. The linear factor shall be 4,3 % from2024 to 2027 and 4,4 % from 2028. The linear factor shall also apply to the allowances
corresponding to the maritime transport activities’ average emissions reported inaccordance with Regulation (EU) 2015/757 for 2018 and 2019 that are addressed in
Article 3g. The Commission shall publish the Union-wide quantity of allowances within 3months of [date of entry into force of the amendment to be inserted].’From 1 January 2026 and 1 January 2027 respectively, the quantity of allowances shallbe increased to take into account the coverage of other greenhouse gas emissions thanCO2 emissions from maritime and the coverage of emissions of offshore ships, based on
their emissions for the most recent year for which data is available. Notwithstanding
Article 10(1), the allowances resulting from that increase shall be made available tosupport innovation in accordance with Article 10a(8).”;6210/23
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(11)

Article 10 is amended as follows:(a)in paragraph 1, the third subparagraph is replaced by the following:“2 % of the total quantity of allowances between 2021 and 2030 shall be auctioned toestablish a fund to improve energy efficiency and modernise the energy systems ofcertain Member States (‘the beneficiary Member States’) as set out in Article 10d(‘the Modernisation Fund’). The beneficiary Member States for this amount ofallowances shall be the Member States with a GDP per capita at market prices below
60 % of the Union average in 2013. The funds corresponding to this quantity ofallowances shall be distributed in accordance with Part A of Annex IIb.
In addition, 2,5 % of the total quantity of allowances between 2024 and 2030 shall be
auctioned for the Modernisation Fund. The beneficiary Member States for thisamount of allowances shall be the Member States with a GDP per capita at market
prices below 75 % of the Union average during the period 2016 to 2018. The funds
corresponding to this quantity of allowances shall be distributed in accordance withPart B of Annex IIb.”;(b)

in paragraph 3, the first and second sentence are replaced by the following:“3.

Member States shall determine the use of revenues generated from theauctioning of allowances referred to in paragraph 2, except for the revenues
established as own resources in accordance with Article 311(3) TFEU andentered in the Union budget. Member States shall use those revenues ▌with the
exception of the revenues used for the compensation of indirect carbon costs
referred to in Article 10a(6), or the equivalent in financial value of theserevenues, for one or more of the following:”;

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(ba) in paragraph 3, first subparagraph, points (b) to (f) are replaced by the following:(b)

to develop renewable energies and grids for electricity transmission to meetthe commitment of the Union to renewable energies and the Union targets on
interconnectivity, as well as to develop other technologies that contribute to
the transition to a safe and sustainable low-carbon economy, and to help tomeet the commitment of the Union to increase energy efficiency, at the levels
agreed in relevant legislative acts, including the production of electricity
from renewables self-consumers and renewable energy communities;(c)measures to avoid deforestation and support the protection and restoration ofpeatland, forests and other land or marine based ecosystems, including
measures that contribute to the protection, restoration and better
management thereof, in particular as regards marine protected areas, andincrease biodiversity-friendly afforestation and reforestation, including indeveloping countries that have ratified the international agreement on
climate change, and measures to transfer technologies and to facilitate
adaptation to the adverse effects of climate change in those countries;(d)forestry and soil sequestration in the Union;(e)

the environmentally safe capture and geological storage of CO2, in particularfrom solid fossil fuel power stations and a range of industrial sectors andsubsectors, including in third countries, and innovative technological carbon
removal methods, such as Direct Air Capture (‘DAC’) and its storage;

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(f)

to invest in and accelerate the shift to forms of transport which contributesignificantly to the decarbonisation of the sector , including the developmentof climate-friendly passenger and freight rail transport and bus services andtechnologies, measures to decarbonise the maritime sector, including theimprovement of the energy efficiency of ships, ports, innovative technologies
and infrastructure, and sustainable alternative fuels, such as hydrogen andammonia that are produced from renewables, and zero-emission propulsion
technologies, and to finance measures to support airports’ decarbonisationin accordance with Regulation (EU) .../... [deployment of alternative fuels
infrastructure], and Regulation (EU) .../... [ensuring a level playing field forsustainable air transport];”;(c)

in paragraph 3, point (h) is replaced by the following:“(h) measures intended to improve energy efficiency, district heating systems andinsulation, efficient and renewable heating and cooling systems, or to support
the deep and staged deep renovation of buildings in accordance with Article
2, points (19) and (20), of Directive (EU) .../... [Recast EPBD], starting withthe renovation of the worst-performing buildings;”;(ca) in paragraph 3, first subparagraph, the following points are inserted:“(ha) to provide financial support in order to address social aspects in lower- andmiddle-income households, including by reducing distortive taxes, andtargeted reductions of duties and charges for renewable electricity;(hb) to finance national climate dividend schemes with a proven positiveenvironmental impact as documented in the annual report referred to in
Article 19(2) of Regulation (EU) 2018/1999 of the European Parliament andof the Council;”;

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(cb) in paragraph 3, first subparagraph, point (k) is replaced by the following:“(k) to promote skill formation and reallocation of labour in order to contributeto a just transition to a climate-neutral economy, in particular in regions
most affected by the transition of jobs, in close coordination with the social
partners and invest in upskilling and re-skilling of workers potentiallyaffected by the transition, including workers in the maritime transport sector;(l)to address any residual risk of carbon leakage in the sectors covered byAnnex I of Regulation (EU) 20…/nn [CBAM Regulation], supporting thetransition and promoting their decarbonisation in accordance with State aid
rules.”;(cc) in paragraph 3, the following subparagraph is inserted after the firstsubparagraph:“When determining the use of revenues generated from the auctioning of theallowances, Member States shall take into account the need to continue scaling-up
international climate finance in vulnerable third countries referred to in point (j)of the first subparagraph.”;(cd) in paragraph 3, the second subparagraph is replaced by the following:“Member States shall be deemed to have fulfilled the provisions of this paragraphif they have in place and implement fiscal or financial support policies, including
in particular in developing countries, or domestic regulatory policies, whichleverage financial support, established for the purposes set out in the firstsubparagraph and which have a value equivalent to the revenues referred to in thefirst subparagraph.”;6210/23
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(ce) in paragraph 3, the third subparagraph is replaced by the following:“Member States shall inform the Commission as to the use of revenues and theactions taken pursuant to this paragraph in their reports submitted under Article
19(2) of Regulation (EU) 2018/1999, specifying where relevant and as appropriate,
which revenues and the actions are undertaken to implement their integrated
national energy and climate plan submitted in accordance with Regulation (EU)2018/1999, and their territorial just transition plan prepared in accordance with
Article 11 of Regulation (EU) 2021/1056 of the European Parliament and of theCouncil.
The reporting shall be sufficiently detailed to enable the Commission to assess theMember States compliance with Article 10(3), first paragraph.”;(d)in paragraph 4, the first sentence is replaced by the following:“4.

The Commission is empowered to adopt delegated acts in accordance with
Article 23 to supplement this Directive concerning the timing, administrationand other aspects of auctioning, including the modalities of the auctioning
which are made necessary for the transfer of a share of revenues to the Union
budget as externally assigned revenue in accordance with Article 30d(3a) or
as own resources in accordance with Article 311(3) TFEU, in order to ensurethat it is conducted in an open, transparent, harmonised and non-discriminatory
manner.”6210/23
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(da) paragraph 5 is replaced by the following:“5.

The Commission shall monitor the functioning of the European carbon
market. Each year, it shall submit a report to the European Parliament andto the Council on the functioning of the carbon market and on other relevant
climate and energy policies, including the operation of the auctions, liquidity
and the volumes traded, and summarising the information provided by theEuropean Securities and Markets Authority (ESMA) in accordance withparagraph 6 of this Article and the information provided by Member Stateson the financial measures referred to in Article 10a(6). If necessary, Member
States shall ensure that any relevant information is submitted to theCommission at least two months before the Commission adopts the report.”;6210/23
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(db) the following paragraph is added:“6.

ESMA shall regularly monitor the integrity and transparency of theEuropean carbon market, in particular with respect to market volatility andprice evolution, the operation of the auctions and trading operations on themarket of emission allowances and derivatives thereof, including over-thecounter trading, liquidity and the volumes traded, and the categories andtrading behaviour of market participants, including positions of financial
intermediaries. ESMA shall include the relevant findings and, where
necessary, make recommendations in its assessments to the European
Parliament, to the Council, to the Commission and to the European Systemic
Risk Board in accordance with Article 32(3) of Regulation (EU) No
1095/2010 of the European Parliament and of the Council (*). For the
purposes of the tasks referred to in the first sentence, ESMA and the relevant
competent authorities shall cooperate and exchange information on detailsof all types of transactions in accordance with Article 25 of Regulation (EU)No 596/2014 of the European Parliament and of the Council (**).
_________(*)

Regulation (EU) No 1095/2010 of the European Parliament and of theCouncil of 24 November 2010 establishing a European Supervisory
Authority (European Securities and Markets Authority), amending
Decision No 716/2009/EC and repealing Commission Decision
2009/77/EC (OJ L 331 15.12.2010, p. 84).

(**) Regulation (EU) No 596/2014 of the European Parliament and of theCouncil of 16 April 2014 on market abuse (market abuse regulation)and repealing Directive 2003/6/EC of the European Parliament and of
the Council and Commission Directives 2003/124/EC, 2003/125/EC
and 2004/72/EC (OJ L 173 12.6.2014, p. 1).”;6210/23
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(12)

Article 10a is amended as follows:(a)paragraph 1 is amended as follows:(i)the following ▌subparagraphs are inserted after the second subparagraph:“If an installation is covered by the obligation to conduct an energy audit or to
implement a certified energy management system under Article 8 of Directive
2012/27/EU of the European Parliament and of the Council(*) and if therecommendations of the audit report or of the certified energy management
system are not implemented, unless the pay-back time for the relevant
investments exceeds three years or unless the costs of those investments are
disproportionate, then the amount of free allocation shall be reduced by 20 %.
The amount of free allocation shall not be reduced if an operator demonstrates
that it has implemented other measures which lead to greenhouse gas emission
reductions equivalent to those recommended by the audit report or the certified
energy management system for the installation concerned.
The Commission shall supplement this Directive by providing, in the acts
adopted pursuant to Article 10a(1) and without prejudice to the rules
applicable under the [Energy Efficiency Directive [2012/27/EU], foradministratively simple harmonised rules for the application of the third
subparagraph that ensures that the application of the conditionality does notjeopardise a level playing field, environmental integrity or equal treatment
between installations across the Union. Those harmonized rules shall inparticular provide timelines, criteria for the recognition of implemented
energy efficiency measures as well as for alternative measures reducing
GHG emissions, using the procedure for national implementing measures inaccordance with Article 11(1).

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In addition to the requirements set out in the third subparagraph of thisparagraph, the reduction by 20 % referred to in that subparagraph shall beapplied where, by 1 May 2024, operators of installations whose greenhousegas emission levels are higher than the 80 percentile of emission levels forthe relevant product benchmarks have not established a climate neutrality
plan for each of those installations for its activities covered by this Directive.
That plan shall contain the elements specified in Article 10b(4) and beestablished in accordance with the implementing act provided for in Article
10b(4). Article 10b(4) shall be read as only referring to installation level. The
attainment of the targets and milestones referred to in the third
subparagraph of Article 10b(4), point (b) shall be verified with respect to theperiod until 31 December 2025 and with respect to each period ending 31
December of each fifth year thereafter, in accordance with the verification
and accreditation procedures provided for in Article 15. No free allowances
beyond 80 % shall be allocated if achievement of the intermediate targets andmilestones has not been verified with respect to the period up to the end of2025 or with respect to the period 2026 to 2030.
Allowances that are not allocated due to a reduction of free allocation inaccordance with the third and fifth subparagraphs of this Article shall be
used to exempt installations from the adjustment in accordance with the firstsubparagraph of Article 10a(5). Where any such allowances remain, 50 % of
these allowances shall be made available to support innovation inaccordance with Article 10a(8). The other 50 % of these allowances shall be
auctioned in accordance with Article 10(1) and Member States should use
the respective revenues to address any residual risk of carbon leakage in the
sectors covered by Annex I of Regulation (EU) 20…/nn [CBAM Regulation],
supporting the transition and promoting their decarbonisation in accordancewith State aid rules.

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No free allocation shall be given to installations in sectors or subsectors to theextent they are covered by other measures to address the risk of carbon leakage
as established by Regulation (EU) 20../nn [▌CBAM Regulation] ▌. The
measures referred to in the first subparagraph shall be adjusted accordingly;_________(*)

Directive 2012/27/EU of the European Parliament and of the Council of 25
October 2012 on energy efficiency, amending Directives 2009/125/EC and2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC (OJ L 315,14.11.2012, p. 1).”;▌(ii)

the following sentence is added at the end of the third subparagraph:“In order to provide further incentives for reducing greenhouse gas emissions
and improving energy efficiency and to ensure a level playing field for
installations using new technologies that partly or fully reduce greenhousegas emissions and existing technologies, the determined Union-wide ex-antebenchmarks shall be reviewed for their application in the period from 2026 to2030, in view of potentially modifying the definitions and system boundaries
of existing product benchmarks, considering as guiding principles the circularuse potential of materials and that the benchmarks should be independent of
the feedstock and the type of production process, where the production
processes have the same purpose. The Commission shall endeavour to adopt
the implementing acts for the purpose of determining the revised benchmark
values for free allocation in accordance with the third subparagraph ofparagraph 2 as soon as possible and before the start of the period from 2026
to 2030.”;

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(b)

the following paragraph 1a is inserted:“1a. Subject to the application of Regulation (EU) 20…/nn [CBAM Regulation],no free allocation shall be given in relation to the production of products listed
in Annex I of that Regulation ▌.
By way of derogation from the first subparagraph, for the first years ofapplication of Regulation (EU) 20…/nn [CBAM Regulation], the productionof ▌products listed in Annex I to that Regulation shall benefit from freeallocation in reduced amounts. A factor reducing the free allocation for the
production of those products shall be applied (CBAM factor). The CBAM
factor shall be equal to 100 % for the period between the entry into force ofthat Regulation ▌ and the end of 2025 and, subject to the application ofprovisions referred to in Article 36(3), point (b), of that Regulation, shall beequal to 97,5 % in 2026, 95 % in 2027, 90 % in 2028, 77,5 % in 2029, 51,5 %in 2030, 39 % in 2031, 26,5 % in 2032 and 14 % in 2033. From 2034, no
CBAM factor shall apply.
The reduction of free allocation shall be calculated annually as the average
share of the demand for free allocation for the production of products listed in
Annex I of Regulation (EU) 20…/nn [CBAM Regulation] compared to thecalculated total free allocation demand for all installations, for the relevant
period referred to in Article 11, paragraph 1. The CBAM factor shall beapplied.
Allowances resulting from the reduction of free allocation shall be madeavailable to support innovation in accordance with Article 10a(8).

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One year before the end of the transitional period defined in Article 32 ofRegulation (EU) 20…/nn [CBAM Regulation] as part of its annual report to
the European Parliament and to the Council pursuant to Article 10(5) of
Directive 2003/87/EC, the Commission shall assess the carbon leakage risk
for goods subject to CBAM and produced in the Union for export to third
countries which do not apply the EU ETS or a similar carbon pricing
mechanism. The report shall in particular assess the carbon leakage risk insectors to which CBAM will apply, in particular the role and accelerated
uptake of hydrogen, and the developments as regards trade flows and theembedded emissions of goods produced by those sectors on the global market.
Where the report concludes that there is a carbon leakage risk for goods
produced in the Union for export to third countries which do not apply the
EU ETS or an equivalent carbon pricing mechanism, the Commission shall,where appropriate, present a legislative proposal to address that carbon
leakage risk in a manner that is compliant with WTO rules including Article
XX of the GATT, and takes into account the decarbonisation of installationsin the Union.”;(c)paragraph 2 is amended as follows:(i)in the third subparagraph, point (c) is replaced by the following:“(c) For the period from 2026 to 2030, the benchmark values shall be
determined in the same manner as set out in points (a) and (d), taking
into account point (e), on the basis of information submitted pursuant to
Article 11 for the years 2021 and 2022 and on the basis of applying theannual reduction rate in respect of each year between 2008 and 2028.”;6210/23
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(ii)

in the third subparagraph, the following points are added:“(d) Where the annual reduction rate exceeds 2,5 % or is below 0,3 %, thebenchmark values for the period from 2026 to 2030 shall be thebenchmark values applicable in the period from 2013 to 2020 reduced bywhichever of those two percentage rates is relevant, in respect of eachyear between 2008 and 2028;(e)

For the period from 2026 to 2030, the annual reduction rate of the
product benchmark hot metal shall not be affected by the change ofbenchmark definitions and system boundaries applicable pursuant to
the fifth subparagraph of Article 10a(1).”;(iii) the fourth subparagraph is replaced by the following:“By way of derogation regarding the benchmark values for aromatics andsyngas, those benchmark values shall be adjusted by the same percentage as
the refineries benchmarks in order to preserve a level playing field for
producers of those products.”;(d)paragraphs 3 and 4 are deleted;(da) paragraph 5 is replaced by the following:“In order to respect the auctioning share set out in Article 10, for every year inwhich the sum of free allocations does not reach the maximum amount that
respects the auctioning share, the remaining allowances up to that amount shall be
used to prevent or limit reduction of free allocations to respect the auctioning
share in later years. Where, nonetheless, the maximum amount is reached, freeallocations shall be adjusted accordingly. Any such adjustment shall be done in a
uniform manner. However, installations whose greenhouse gas emission levels are
below the average of the 10 % most efficient installations in a sector or subsector
in the Union for the relevant benchmarks in a year when the adjustment applies
shall be exempted from that adjustment.”;

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(e)

in paragraph 6, the first subparagraph is replaced by the following:“Member States should adopt financial measures in accordance with the second andfourth subparagraphs in favour of sectors or subsectors which are exposed to agenuine risk of carbon leakage due to significant indirect costs that are actually
incurred from greenhouse gas emission costs passed on in electricity prices, provided
that such financial measures are in accordance with State aid rules, and in particular
do not cause undue distortions of competition in the internal market. The financial
measures adopted should not compensate indirect costs covered by free allocation inaccordance with the benchmarks established pursuant to paragraph 1. Where a
Member State spends an amount higher than the equivalent of 25 % of the auction
revenues referred to in Article 10(3) of the year in which the indirect costs wereincurred, it shall set out the reasons for exceeding that amount.”;(f)

in paragraph 7, the second subparagraph is replaced by the following:“From 2021, allowances that pursuant to paragraphs 19, 20 and 22 are not allocatedto installations shall be added to the amount of allowances set aside in accordancewith the first sentence of the first subparagraph of this paragraph.”;6210/23
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(g)

paragraph 8 is replaced by the following:“8.

345 million allowances from the quantity which could otherwise be allocatedfor free pursuant to this Article, and 80 million allowances from the quantity
which could otherwise be auctioned pursuant to Article 10, as well as theallowances resulting from the reduction of free allocation referred to in Article
10a(1a), shall be made available to a Fund with the objective of supporting
innovation in low- and zero carbon techniques, processes and technologies
that contribute significantly to the decarbonisation of the sectors covered bythis Directive and contribute to zero pollution and circularity objectives
including projects aimed at scaling up such techniques, processes andtechnologies with a view to their broad roll-out across the EU. Such projects
shall possess a significant greenhouse gas emissions abatement potential andcontribute to energy and resource savings in line with the Union’s climate
and energy targets for 2030.
The Commission shall frontload Innovation Fund allowances to ensure anadequate amount of resources is available to foster innovation, including
upscaling.
Allowances that are not issued to aircraft operators due to the closure ofaircraft operators and which are not necessary to cover any shortfall insurrenders by those operators, shall also be used for innovation support asreferred to in the first subparagraph.
Moreover, 5 million allowances from the quantity referred to in Article 3c(5)and (6) relating to aviation allocations for 2026 shall be made available forsuch innovation support.

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In addition, 50 million unallocated allowances from the market stability reserve
shall supplement any remaining revenues from the 300 million allowances
available in the period from 2013 to 2020 under Commission
Decision 2010/670/EU(*), and shall be used in a timely manner for innovation
support as referred to in the first subparagraph. ▌34
The Innovation Fund shall cover the sectors listed in Annex I and Annex III,▌as well as products and processes substituting carbon intensive ones
produced in sectors listed in Annex I, including innovative renewable energy
and energy storage technologies and environmentally safe carbon capture
and utilisation ("CCU") that contributes substantially to mitigating climatechange, in particular for unavoidable process emissions and to help stimulate
the construction and operation of projects aimed at the environmentally safe
capture, transport and geological storage (“CCS”) of CO2, in particular forunavoidable industrial process emissions, and the direct capture of CO2 fromthe atmosphere with safe, sustainable and permanent storage (‘DACS’), in
geographically balanced locations. The Innovation Fund may also support
break-through innovative technologies and infrastructure, including
production of low- and zero-carbon fuels, to decarbonise the maritime,
aviation, rail and road transport sectors, including collective forms oftransport such as public transport and coach service.
For aviation, it may also support electrification and actions to reduce theoverall climate impacts of aviation.

34

6210/23
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the external assigned revenues referred to in Article 21(2) of Regulation (EU) [FuelEU
Maritime] shall be allocated to the Innovation Fund and implemented in line with thisparagraph.”].
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The Commission shall give special attention ▌to projects in sectors covered byRegulation (EU) 20…/nn [CBAM Regulation] to support innovation in low
carbon technologies, CCU, CCS, renewable energy and energy storage, in a
way that contributes to mitigating climate change with the aim that over the2021-2030 period, projects in those sectors are awarded a significant share of
the equivalence in financial value of allowances mentioned in paragraph 1aof this article, and may launch before 2027 calls for proposals dedicated tothe sectors covered by that Regulation.
The Commission shall give special attention to projects contributing todecarbonize the maritime sector and shall include topics dedicated to thedecarbonisation of the maritime sector in the Innovation Fund calls for
proposals, as appropriate, including to electrify maritime transport, and toaddress its full climate impact, including black carbon emissions. These calls
shall also take particular account of the potential for also increasing
biodiversity protection and for reducing noise and water pollution of projects
and investments in the criteria used for the selection of projects.
The Innovation Fund may in accordance with paragraph 8a support projects
through competitive bidding, such as CDs, CCDs or fixed premium contracts
to support decarbonisation technologies for which the carbon price might not
be a sufficient incentive.
The Commission shall seek synergies between the Innovation Fund andHorizon Europe, in particular in relation to European partnerships, andshall, where relevant, seek synergies between the Innovation Fund and other
Union programmes.

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Projects in the territory of all Member States, including small-scale andmedium-scale projects, shall be eligible, and, for maritime activities, projects
with clear EU added value. Technologies receiving support shall be innovativeand not yet commercially viable at a similar scale without support but shallrepresent breakthrough solutions or be sufficiently mature for application at
pre-commercial scale.
The Commission shall ensure that the allowances destined for the Innovation
Fund are auctioned in accordance with the principles and modalities laid downin Article 10(4). Proceeds from the auctioning shall constitute external
assigned revenue in accordance with Article 21(5) of ▌Regulation (EU,
Euratom) 2018/1046 of the European Parliament and of the Council(**).
Budgetary commitments for actions extending over more than one financial
year may be broken down over several years into annual instalments.
The Commission shall on request provide technical assistance to Member
States with low effective participation for the purpose of increasing thecapacities of the requesting Member State to support the efforts of project
proponents in their respective territories to submit applications for funding
from the Innovation Fund, in order to improve the effective geographicalparticipation in the Innovation Fund and increase the overall quality ofsubmitted projects. The Commission shall pursue effective, quality-based
geographical coverage across the Union and ensure comprehensive
monitoring of its progress and appropriate follow-up.
Subject to the agreement of applicants, following the closure of a call for
proposals, the Commission shall inform Member States of the applications
for funding of projects in their respective territories and shall provide themwith detailed information of those applications in order to facilitate theMember States’ coordination of the support to projects. In addition, theCommission shall inform the Member States about the list of pre-selected
projects prior to the award of the support.

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Projects shall be selected by way of a transparent selection procedure, in atechnology-neutral manner in accordance with the objectives of theInnovation Fund as set out in the first subparagraph of this paragraph andon the basis of objective and transparent criteria, taking into account the extent
to which projects provide a significant contribution to the Union's climate
and energy targets while contributing to the zero pollution and circularity
objectives in accordance with the first subparagraph of this paragraph, and,
where relevant, the extent to which projects contribute to achieving emission
reductions well below the benchmarks referred to in paragraph 2. Projects shallhave the potential for widespread application or to significantly lower the costsof transitioning towards a climate neutral economy in the sectors concerned.
Priority shall be given to innovative technologies and processes addressing
multiple environmental impacts. Projects involving CCU shall deliver a net
reduction in emissions and ensure avoidance or permanent storage of CO2. In
the case of grants provided through calls for proposals, up to 60 % of therelevant costs of projects may be supported, out of which up to 40 % need not
be dependent on verified avoidance of greenhouse gas emissions, provided that
pre-determined milestones, taking into account the technology deployed, areattained. In the case of support provided through competitive bidding and in
the case of technical assistance support, up to 100 % of the relevant costs ofprojects may be supported. The potential for emission reductions in multiple
sectors offered by combined projects, including in nearby areas, shall betaken into account in the criteria used for the selection of projects.
Projects funded by the Innovation Fund shall be required to shareknowledge with other relevant projects as well as with Union-based
researchers having a legitimate interest. The terms of knowledge-sharing
shall be defined by the Commission in calls for proposals.

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The calls for proposal shall be open and transparent. In preparing the calls
for proposal, the Commission shall strive to ensure that all sectors are duly
covered. The Commission shall take measures to ensure that the calls arecommunicated as widely as possible, and especially to small and mediumsized enterprises (‘SMEs’).
The Commission is empowered to adopt delegated acts in accordance with
Article 23 to supplement this Directive concerning rules on the operation of theInnovation Fund, including the selection procedure and criteria, and the eligible
sectors and technological requirements for the different types of support.
No project shall receive support via the mechanism under this paragraph thatexceeds 15 % of the total number of allowances available for this purpose.
These allowances shall be taken into account under paragraph 7.
By 31 December 2023 and every year thereafter, the Commission shall reportto the Climate Change Committee referred to in Article 22a(1), on theimplementation of the Innovation Fund, providing an analysis of awarded
projects by sector and by Member State, and the expected contribution of theawarded projects towards the objective of climate neutrality in the Union as
set out in Regulation (EU) 2021/1119. The Commission shall provide thereport to the Council and the European Parliament and the report shall bemade public.
_________(*)

Commission Decision 2010/670/EU of 3 November 2010 laying down criteria
and measures for the financing of commercial demonstration projects that aim
at the environmentally safe capture and geological storage of CO 2 as well as
demonstration projects of innovative renewable energy technologies under thesystem for greenhouse gas emission allowance trading within the Union
established by Directive 2003/87/EC of the European Parliament and of theCouncil (OJ L 290, 6.11.2010, p. 39).

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(**) Regulation (EU, Euratom) 2018/1046 of the European Parliament and of theCouncil of 18 July 2018 on the financial rules applicable to the generalbudget of the Union, amending Regulations (EU) No 1296/2013, (EU) No
1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013,(EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No
541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012 (OJ L
193, 30.7.2018, p. 1).”;(ga) the following paragraphs are inserted:“8a. For CDs and CCDs awarded upon conclusion of a competitive bidding
procedure, appropriate coverage by budgetary commitments resulting fromthe proceeds of auctioning of allowances available in the Innovation Fundshall be provided and those budgetary commitments may be broken downover several years into annual instalments. For the first two rounds of thecompetitive bidding mechanism, coverage of the financial liability related to
CDs and CCDs shall be fully ensured with appropriations resulting from theproceeds of auctioning of allowances allocated to the Innovation Fundpursuant to paragraph 8.
On the basis of a qualitative and quantitative assessment by the Commissionof the financial risks arising from the implementation of CDs and CCDs, tobe made after the conclusion of the first two rounds of competitive bidding
mechanism and each time it is necessary afterwards in accordance with theprinciple of prudence whereby assets and profits shall not be overestimatedand liabilities and losses shall not be underestimated, the Commission may,in accordance with the empowerment in the eighth subparagraph decide tocover only part of the financial liability related to CDs and CCDs and theremaining part by other means. The Commission shall aim to limit the use ofother means of coverage.

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Where the assessment leads to the conclusion that other means of coverage
are necessary to realize the full potential of the CDs and CCDs, theCommission shall aim for a balanced mix of other means of coverage. By
derogating from Article 210(1), the Commission shall determine the extent of
the use of other means of coverage pursuant to the delegated act provided forin the eighth subparagraph.
The remaining financial liability shall be sufficiently covered, having regard
to the principles of Title X of Regulation (EU, Euratom) 2018/1046, if
necessary, adapted to the specificities of CDs and CCDs, by derogating from
Articles 209(2) points d) and h), 210(1), 211(1), (2), (4), and (6), 212 to 214,
218(1) and 219(3) and (6). Where applicable, other means of coverage, theprovisioning rate and the necessary derogations shall be established in adelegated act provided for in the eighth subparagraph.
The Commission shall not use more than 30 % of the proceeds of auctioningof allowances allocated to the Innovation Fund pursuant to paragraph 8 forprovisioning for CDs and CCDs.
The provisioning rate shall be no lower than 50 % of the total financial
liability borne by the Union budget for CDs and CCDs and when setting itout, the Commission shall take into account elements that may reduce thefinancial risks for the EU budget, beyond the appropriations available in the
Innovation Fund, such as possible sharing of liability with Member States on
a voluntary basis, or a possible re-insurance mechanism from the private
sector. The Commission shall review the provisioning rate at least every 3
years from the date of application of the delegated act setting it out for the
first time.

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In order to avoid speculative applications, access to competitive bidding may
be made conditional on the payment by applicants of a deposit to be forfeitedin case of non-fulfilment of the contract. Such forfeited deposits shall accrue
to the Innovation Fund as external assigned revenue pursuant to Article
21(5) of Regulation (EU, Euratom) 2018/1046. Any contribution paid to the
granting authority by a beneficiary in accordance with the terms of the CD
or CCD where the reference price is higher than the strike price (reflows)
shall accrue to the Innovation Fund as external assigned revenue pursuant
to Article 21(5) of Regulation (EU, Euratom) 2018/1046.
The Commission is empowered to adopt delegated acts in accordance with
Article 23 to supplement this Directive in order to provide for and detail othermeans of coverage, if any, and, where applicable, the provisioning rate andthe necessary additional derogations to Title X of Regulation (EU, Euratom)
2018/1046 as set out in the fourth subparagraph, and in addition the rules on
the operation of competitive bidding mechanisms, in particular in relation todeposits and reflows.
The Commission is empowered to adopt delegated acts in accordance with
Article 23 to amend the fifth subparagraph by raising the limit of 30 %referred in that subparagraph by no more than a total of 20 percentage
points where necessary to respond to a demand for CDs and CCDs taking
into account the experience of the first rounds of competitive bidding andconsidering the need to find an appropriate balance in the support from theInnovation Fund between such contracts and grants.
Financial support from the Innovation Fund shall be proportionate to thepolicy objectives set out in this Article and shall not lead to undue distortionsof the internal market. To this end, support shall only be granted to coveradditional costs or investment risks that cannot be borne by investors undernormal market conditions.

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8b.

40 million allowances from the quantity which could otherwise be allocatedfor free pursuant to this Article, and 10 million allowances from the quantity
which could otherwise be auctioned pursuant to Article 10 shall be madeavailable for the Social Climate Fund established by Regulation (EU)
20…/nn of the European Parliament and of the Council [Social Climate
Fund Regulation](*). The Commission shall ensure that the allowances
destined for the Social Climate Fund are auctioned in 2025 in accordancewith the principles and modalities of Article 10(4) and the delegated act
adopted in accordance with that provision. The revenues from thisauctioning shall constitute external assigned revenue in accordance with
Article 21(5) of Regulation (EU, Euratom) 2018/1046, and shall be
implemented in accordance with the rules applicable to the Social Climate
Fund.”;(h)in paragraph 19, the first sentence is replaced by the following:“19. No free allocation shall be given to an installation that has ceased operating.”;(i)the following paragraph 22 is added:“22. Where corrections to free allocations granted pursuant to Article 11(2) arenecessary, these shall be carried out with allowances from, or by adding
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(12a)in Article 10b(4), the following subparagraphs are added:“In Member States where, on average in the years 2014-2018, the share of emissions
from district heating of the EU total of such emissions divided by the Member States’
share of GDP of the EU total GDP is greater than 5 for district heating for the period
from 2026 to 2030, additional free allocation of 30 % of the quantity determined
pursuant to Article 10a shall be given to district heating provided that an investment
volume equivalent to the value of that additional free allocation received is invested tosignificantly reduce emissions before 2030 in accordance with climate-neutrality plansin accordance with the third sub-paragraph and that the attainment of the targets andmilestones referred to in point (b) of the third subparagraph are confirmed by theverification carried out in accordance with the fourth subparagraph.
By 1 May 2024, operators of district heating shall establish a climate-neutrality plan for
the installations for which they apply for additional free allocation in accordance withthe second subparagraph. That plan shall be consistent with the climate-neutrality
objective set out in Article 2(1) of Regulation (EU) 2021/1119 and shall set out:(a)measures and investments to reach climate-neutrality by 2050 at installation orcompany-level, excluding the use of carbon offset credits;(b)intermediate targets and milestones to measure, by 31 December 2025 and by 31
December of each fifth year thereafter, progress made towards reaching climate neutrality as set out in point (a);(c)

an estimate of the impact of each of the measures and investments referred to inpoint (a) as regards the reduction of greenhouse gas emissions.

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The attainment of the targets and milestones referred to in the third subparagraph, point(b), shall be verified with respect to the period until 31 December 2025 and with respect
to each period ending 31 December of each fifth year thereafter, in accordance with theverification and accreditation procedures provided for in Article 15. No free allowances
beyond what is referred to in the first subparagraph shall be allocated if achievement of
the intermediate targets and milestones has not been verified with respect to the period
up to the end of 2025 or with respect to the period 2026 to 2030.
The Commission shall adopt implementing acts in accordance with the procedure set out
in Article 22a(2) to specify the minimal content of the information referred to in pointsa) to c) and the format of the climate-neutrality plans referred to in the third
subparagraph of this paragraph and in the fifth subparagraph of Article 10a(1). The
Commission shall seek synergies with similar plans as provided for in Union law.”;(13)

in Article 10c, paragraph 7 is replaced by the following:“Member States shall require benefiting electricity generating installations and network
operators to report, by 28 February of each year, on the implementation of their selected
investments, including the balance of free allocation and investment expenditure incurred
and the types of investments supported. Member States shall report on this to theCommission, and the Commission shall make such reports public.”;

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(13a)

the following article is inserted:“Article 10ca
Earlier deadline for transitional free allocation for the modernisation of the energy
sectorBy way of derogation from Article 10c, the Member States concerned may only givetransitional free allocation to installations in accordance with that Article forinvestments carried out until 31 December 2024. Any allowances available to theMember States concerned in accordance with Article 10c for the period 2021 to 2030
that are not used for such investments shall, in the proportion determined by therespective Member State:(i)be added to the total quantity of allowances that the Member State concerned is to
auction pursuant to Article 10(2); or(ii)

be used to support investments within the framework of the Modernisation Fundreferred to in Article 10d in accordance with the rules applicable to the revenue
from allowances referred to in Article 10d(4).

By 15 May 2024, the Member State concerned shall notify the Commission of therespective amounts of allowances to be used under Article 10(2)(a) and, by way of
derogation from the second sentence of Article 10d(4), Article 10(d).”(14)

Article 10d is amended as follows:(a)in paragraph 1, the first and second subparagraphs are replaced by the following:“1.

A fund to support investments proposed by the beneficiary Member States,
including the financing of small-scale investment projects, to modernise energy
systems and improve energy efficiency shall be established for the period from2021 to 2030 (the ‘Modernisation Fund’). The Modernisation Fund shall befinanced through the auctioning of allowances as set out in Article 10, for the
beneficiary Member States set out therein.

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The investments supported shall be consistent with the aims of this Directive,
as well as the objectives of the Communication from the Commission of 11
December 2019 on The European Green Deal (*) and Regulation (EU)2021/1119 of the European Parliament and of the Council (**) and the longterm objectives as expressed in the Paris Agreement. The beneficiary Member
States may, where appropriate, use the resources of the Modernisation Fundto finance investments involving the adjacent EU border regions. No support
from the Modernisation Fund shall be provided to energy generation facilities
that use fossil fuels. Notwithstanding the preceding sentence, revenue fromallowances covered by a notification pursuant to Article 10d(4) may be used
for investments involving gaseous fossil fuels. Notwithstanding the samesentence, revenue from allowances referred to in the third subparagraph of
Article 10(1) may, where the activity qualifies as environmentally sustainable
under Regulation (EU) 2020/852 and is duly justified for reasons of ensuring
energy security, be used for investments involving gaseous fossil fuels
provided that, for energy generation, the allowances are auctioned before 31
December 2027 and, for investments involving downstream uses of gas, theallowances are auctioned before 31 December 2028.
_________(*)

COM(2019) 640 final.

(**) Regulation (EU) 2021/1119 of the European Parliament and of the Council of
30 June 2021 establishing the framework for achieving climate neutrality andamending Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European
Climate Law’) (OJ L 243, 9.7.2021, p. 1).";6210/23
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(b)

paragraph 2 is replaced by the following:“2.

At least 80 % of the revenue from allowances referred to in the third
subparagraph of Article 10(1) and from allowances covered by a notification
pursuant to Article 10d(4), and at least 90 % of the revenue from allowancesreferred to in the fourth subparagraph of Article 10(1) shall be used tosupport investments in the following:(a)the generation and use of electricity from renewable sources, including
renewable hydrogen;(b)heating and cooling from renewable sources;(c)the reduction of overall energy use through energy efficiency, including
in industry, transport, buildings, agriculture and waste;(d)energy storage and the modernisation of energy networks, including
demand-side management, district heating pipelines, grids for electricity
transmission, the increase of interconnections between Member Statesand infrastructure for zero-emission mobility;(e)the support of low-income households, including in rural and remoteareas, to address energy poverty and to modernise their heating systems;
and

(f)

a just transition in carbon-dependent regions in the beneficiary Member
States, so as to support the redeployment, re-skilling and up-skilling ofworkers, education, job-seeking initiatives and start-ups, in dialogue withcivil society and social partners, consistent with and contributing to therelevant actions included by the Member States in their territorial justtransition plans in accordance with Article 8(2), point (k), ofRegulation (EU) 2021/1056, where relevant.”;

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(ba) paragraph 11 is replaced by the following:“11. The investment committee shall report annually to the Commission on
experience with the evaluation of investments, notably in terms of emissions
reductions and abatement costs. By 31 December 2024, taking into
consideration the findings of the investment committee, the Commission
shall review the areas for projects referred to in paragraph 2 and the basis onwhich the investment committee bases its recommendations.
The investment committee shall arrange for the publication of the annual
report. The Commission shall provide this publication to the Council and theEuropean Parliament.”;(14a)

the following Article is inserted:“Article 10e
Do no significant harm principle
From January 2025, the beneficiary Member States and the Commission shall use therevenues from auctioning of allowances destined for the Innovation Fund pursuant to
Article 10a(8), and of the allowances referred to in the third and fourth subparagraph of
Article 10(1), in accordance with the ‘do no significant harm’ criteria set out in Article
17 of Regulation (EU) 2020/852(*), where they are used for an economic activity forwhich technical screening criteria for determining whether an economic activity causes
significant harm to one or more of the relevant environmental objective has been
established pursuant to Article 10(3)(b) of that Regulation.”(14b)

Article 11 is amended as follows:(a)6210/23
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(15)

Article 12 is amended as follows:(a)paragraph 2 is replaced by the following:“2.

Member States shall ensure that allowances issued by a competent authority of
another Member State are recognised for the purpose of meeting an operator’s,
an aircraft operator’s or a shipping company’s obligations under paragraph 3.”;(b)paragraph 2a is deleted;(c)paragraph 3 is replaced by the following:“3.

The Member States, administering Member States and administering
authorities in respect of a shipping company shall ensure that, by 30 September
each year:(a)the operator of each installation surrenders a number of allowances that isequal to the total emissions from that installation during the preceding
calendar year as verified in accordance with Article 15;(b)each aircraft operator surrenders a number of allowances that is equal to
its total emissions during the preceding calendar year, as verified inaccordance with Article 15;(c)each shipping company surrenders a number of allowances equal to its
total emissions during the preceding calendar year, as verified inaccordance with Article 3gc.

Member States, administering Member States and administering authorities inrespect of a shipping company shall ensure that allowances surrendered inaccordance with the first subparagraph are subsequently cancelled.”;6210/23
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(d)

After paragraph 3, the following paragraphs are inserted:“3-e. By way of derogation from paragraph 3, first subparagraph, point (c),shipping companies may surrender 5 % fewer allowances than their verified
emissions taking place until 31 December 2030 from ice class ships, provided
that these ships have the ice-class IA or IA Super or an equivalent ice class,established based on the HELCOM Recommendation 25/7.
To the extent that fewer allowances are surrendered compared to the verified
emissions, once the difference between verified emissions and allowancessurrendered has been established in respect of each year, a corresponding
quantity of allowances shall be cancelled rather than auctioned pursuant to
Article 10.
3-d. By way of derogation from paragraph 3, first subparagraph point (c) and
Article 16, the Commission, shall, at the request of a Member State, provide
by means of an implementing act that Member States shall consider therequirements set out in those provisions to be satisfied and that they shalltake no action against shipping companies in respect of emissions taking
place until 31 December 2030 from voyages performed by passenger ships,
other than cruise passenger ships, and by ro-pax ships, between a port of anisland under the jurisdiction of that requesting Member State with no road orrail link with the mainland and a port under the jurisdiction of that same
Member State and from the activities within a port from those ships inrelation to those voyages. The island shall have a permanent population ofless than 200 000 permanent residents according to the latest best data
available in 2022.
The Commission shall publish a list of islands referred to in the firstsubparagraph and the concerned ports and keep that list up to date.

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3-c. By way of derogation from paragraph 3, first subparagraph point (c) and
Article 16, the Commission shall, at the joint request of two Member States,
one of which having no land border with another Member State and theother Member State being the geographically closest Member State to thefirst, provide by means of an implementing act that Member States shallconsider the requirements set out in those provisions to be satisfied and thatthey shall take no action against shipping companies in respect of emissions
taking place until 31 December 2030 from voyages by passenger or ro-pax
ships performed in the framework of a transnational public service contract
or a transnational public service obligation, set out in the joint request,
connecting the two Member States and from the activities within a port fromthose ships in relation to those voyages.
3-b. An obligation to surrender allowances shall not arise in respect of emissions
taking place until 31 December 2030 from voyages between a port located inan outermost region of a Member State and a port located in the same
Member State, including ports within and between the Outermost Regions of
the same Member State, and from the activities within a port from those ships
in relation to those voyages.”(e)in paragraph 3-a, the first sentence is replaced by the following:“3-a. Where necessary, and for as long as is necessary, in order to protect theenvironmental integrity of the EU ETS, operators, aircraft operators, andshipping companies in the EU ETS shall be prohibited from using allowancesthat are issued by a Member State in respect of which there are obligations
lapsing for aircraft operators, shipping companies and other operators.”;

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(f)

the following paragraph 3b is inserted:“3b. An obligation to surrender allowances shall not arise in respect of emissions ofgreenhouse gases which are considered to have been captured and utilised to
become permanently chemically bound in a product so that they do not enter
the atmosphere under normal use, including any normal activity taking place
after the end of life of the product.
The Commission shall adopt delegated acts in accordance with Article 23 to
supplement this Directive concerning the requirements to consider thatgreenhouse gases have become permanently chemically bound in a product sothat they do not enter the atmosphere under normal use, including any normal
activity taking place after the end of the life of the product.”;(g)

paragraph 4 is replaced by the following:“4.

Member States shall take the necessary steps to ensure that allowances will
be cancelled at any time at the request of the person holding them. In theevent of closure of electricity generation capacity in their territory due toadditional national measures, Member States may cancel allowances, andare strongly encouraged to do so, from the total quantity of allowances to be
auctioned by them referred to in Article 10(2) up to an amountcorresponding to the average verified emissions of the installation concernedover a period of five years preceding the closure. The Member State
concerned shall inform the Commission of such intended cancellation, or thereasons for not cancelling, in accordance with the delegated acts adopted
pursuant to Article 10(4).”;6210/23
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(16)

in Article 14(1), the first subparagraph ▌ is replaced by the following:“The Commission shall adopt implementing acts concerning the detailed arrangements
for the monitoring and reporting of emissions and, where relevant, activity data, fromthe activities listed in Annex I, and non-CO2 aviation effects on routes for whichemissions are reported under this Directive, which shall be based on the principles formonitoring and reporting set out in Annex IV and the requirements set out in paragraph
2 and paragraph 2a of this Article. Those implementing acts shall also specify the global
warming potential of each greenhouse gas and take into account up-to-date scientificknowledge on the effects of non-CO2 aviation emissions in the requirements formonitoring and reporting of these emissions and their effects, including non-CO2
aviation effects. Those implementing acts shall apply the sustainability and greenhouse gas
emission saving criteria for the use of biomass established by Directive (EU) 2018/2001 of
the European Parliament and of the Council(*), with any necessary adjustments forapplication under this Directive, for this biomass to be zero-rated. They shall specify how
to account for storage of emissions from a mix of zero-rated sources and sources that are
not zero-rated. They shall also specify how to account for emissions from renewable fuelsof non-biological origin and recycled carbon fuels, ensuring that these emissions areaccounted for and that double counting is avoided”;_________(*)

Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December
2018 on the promotion of the use of energy from renewable sources (OJ L 328,
21.12.2018, p. 82).”;(17)

the title of Chapter IV is replaced by the following:“PROVISIONS APPLYING TO AVIATION, MARITIME TRANSPORT, AND
STATIONARY INSTALLATIONS”;

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(18)

Article 16 is amended as follows:(a)paragraph 2 is replaced by the following:“2.

Member States shall ensure the publication of the names of operators, aircraft
operators and shipping companies who are in breach of requirements tosurrender sufficient allowances under this Directive.”;(ab) in paragraph 3, the date “30 April” is replaced by “30 September”;(b)

the following paragraph 3a is inserted:“3a. The penalties set out in paragraph 3 shall also apply in respect of shipping
companies.”;(c)the following paragraph 11a is inserted:“11a. In the case of a shipping company that has failed to comply with the surrender
requirements for two or more consecutive reporting periods and where otherenforcement measures have failed to ensure compliance, the competentauthority of the Member State of the port of entry may, after giving theopportunity to the shipping company concerned to submit its observations,issue an expulsion order which shall be notified to the Commission, theEuropean Maritime Safety Agency (EMSA), the other Member States and theflag State concerned. As a result of the issuing of such an expulsion order,
every Member State, with the exception of the Member State whose flag theship is flying, shall refuse entry of the ships under the responsibility of theshipping company concerned into any of its ports until the company fulfils its
surrender obligations in accordance with Article 12. Where the ship flies theflag of a Member State and enters or is found in one of its ports, the Member
State concerned shall, after giving the opportunity to the company concerned tosubmit its observations, detain the ship until the shipping company fulfils its
obligations.

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Where a ship that flies the flag of a Member is found with a failure referred
to in the first subparagraph while in one of the ports of the Member State
whose flag the ship is flying, the Member State concerned may, after giving
the opportunity to the company concerned to submit its observations, issue aflag detention order until the shipping company fulfils its obligations. It shallinform the Commission, the EMSA and the other Member States thereof. As
a result of the issuing of such a flag detention order, every Member State
shall take the same measures as following an expulsion order in accordancewith the second sentence of the first subparagraph.
This paragraph shall be without prejudice to international maritime rules
applicable in the case of ships in distress.”;(19)

Article 18b is replaced by the following:“Article 18b
Assistance from the Commission, the European Maritime Safety Agency and otherrelevant organisations
1.

For the purposes of carrying out its obligations under Articles 3c(4), 3f, 3gb, 3gc,
3gd, 3ge and 18a, the Commission, the administering Member State andadministering authorities in respect of a shipping company may request theassistance of the European Maritime Safety Agency or another relevant organisationand may conclude to that effect any appropriate agreements with those organisations.

2.

The Commission, assisted by the European Maritime Safety Agency, shallendeavour to develop appropriate tools and guidance to facilitate and coordinate
verification and enforcement activities related to the application of this Directive tomaritime transport. As far as practicable, such guidance and tools shall be madeavailable to the Member States and the verifiers for information sharing purposes
and in order to better ensure robust enforcement of this Directive.”;

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(19a)

Article 23 is amended as follows:(a)paragraphs 2 and 3 are replaced by the following:“2.

The power to adopt delegated acts referred to in Articles 3d(3), 10(4), 10a(1),(8) and (8a), 10b(5), 12(3b), 19(3), Article 22, Articles 24(3), 24a(1), 25a(1)and Articles 28c and 30j shall be conferred on the Commission for anindeterminate period of time from 8 April 2018.

3.

The delegation of power referred to in Articles 3d(3), 10(4), 10a(1), (8) and(8a), 10b(5), 12(3b), 19(3), Article 22, Articles 24(3), 24a(1), 25a(1) and
Articles 28c and 30j may be revoked at any time by the European Parliamentor by the Council. A decision to revoke shall put an end to the delegation of
the power specified in that decision. It shall take effect the day following the
publication of the decision in the Official Journal of the European Union orat a later date specified therein. It shall not affect the validity of any
delegated acts already in force.”(b)

paragraph 6 is replaced by the following:“6.

A delegated act adopted pursuant to Articles 3d(3), 10(4), 10a(1), (8) and(8a), 10b(5), 12(3b), 19(3), Article 22, Articles 24(3), 24a(1), 25a(1) and
Articles 28c and 30j shall enter into force only if no objection has been
expressed either by the European Parliament or by the Council within aperiod of two months of notification of that act to the European Parliament
and to the Council or if, before the expiry of that period, the European
Parliament and the Council have both informed the Commission that they
will not object. That period shall be extended by two months at the initiativeof the European Parliament or of the Council.”;

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(19b)

Article 29 is replaced by the following:“Article 29
Report to ensure the better functioning of the carbon market
If the regular reports on the carbon market referred to in Article 10(5) and Article 10(6)contain evidence that the carbon market is not functioning properly, the Commission
shall within a period of 3 months submit a report to the European Parliament and to theCouncil. The report may be accompanied, if appropriate, by legislative proposals aiming
at increasing transparency and integrity of the carbon market including related
derivative markets and addressing the corrective measures to improve its functioning aswell as to enhance the prevention and detection of market abuse activities.”(19c)

Article 29a is replaced by the following:“Article 29a
Measures in the event of excessive price fluctuations
1.

If the average allowance price of the six preceding calendar months is more than
2,4 times the average allowance price of the preceding two years reference period,
75 million allowances shall be released from the Market Stability Reserve inaccordance with paragraph 7 of Article 1 of Decision (EU) 2015/1814.
The allowance price referred to in the first subparagraph shall be the price ofauctions carried out in accordance with the act adopted under Article 10(4) for
allowances covered by Chapters II and III.
The preceding two years reference period referred to in the first sub-paragraphshall be the two-year period that ends before the first month of the period of six
calendar months referred to in that sub-paragraph.
Where the condition in the first subparagraph is met and paragraph 2 is notapplicable, the Commission shall publish a notice to that effect in the Official
Journal indicating the date on which the condition were fulfilled.

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The Commission shall publish within the first three working days of each month
the average allowance price of the preceding six calendar months and the average
allowance price of the preceding two years reference period. If the condition ofparagraph 1 of this Article is not met, the Commission shall also publish the levelof price that the average allowance price should reach in the next month in order
to meet the condition in that paragraph.
2.

When the condition for release of allowances from the Market Stability Reserve
pursuant to paragraph 1 of this Article has been met, the condition in paragraph 1
shall not be considered to have been fulfilled again until at least twelve months
after the end of the previous release.

3.

The arrangements for the application of these provisions shall be laid down in theacts referred to in Article 10(4).”;(19d)

in Article 30, paragraph 1 is replaced by the following:“1.

This Directive shall be kept under review in the light of international developments
and efforts undertaken to achieve the long-term objectives of the Paris Agreement,
and any relevant commitments resulting from the Conferences of the Parties to theUnited Nations Framework Convention on Climate Change.";(20)

in Article 30, paragraph 2, the following sentence is added:“The measures applicable to CBAM sectors shall be kept under review in light of theapplication of Regulation (EU) 20…/nn [▌CBAM Regulation]. Before 1 January 2028,
as well as every two years thereafter as part of its reports to the European Parliament
and the Council pursuant to Article 30(6) of that Regulation, the Commission shallassess the impact of the mechanism on the risk of carbon leakage, including in relation
to exports. The report shall assess the need for taking additional measures, including
legislative measures, to address carbon leakage risks. The report shall, if appropriate, be
accompanied by a legislative proposal.”;6210/23
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(20a)in Article 30, paragraph 3 is replaced by the following:“3.

The Commission shall report to the European Parliament and to the Council inthe context of each global stocktake agreed under the Paris Agreement, inparticular with regard to the need for additional Union policies and measures inview of necessary greenhouse gas reductions by the Union and its Member States,
including in relation to the linear factor referred to in Article 9. The Commission
may make proposals to the European Parliament and to the Council to amend thisDirective where appropriate, in particular in order to ensure compliance with theclimate-neutrality objective as laid down in Article 2(1) of Regulation (EU)2021/1119 and the Union climate targets as laid down in Article 4 of that
Regulation. In making its proposal the Commission shall, to that end inter alia
consider the projected indicative Union greenhouse gas budget for the 2030-2050
period as referred to in Article 4(4) of that Regulation.”;(20b)

in Article 30, the following paragraphs are added:“4a. By 31 July 2026, the Commission shall report to the European Parliament and to
the Council on the following, accompanied, where appropriate, by a legislative
proposal and impact assessment:(a)how negative emissions resulting from greenhouse gases that are removed
from the atmosphere and safely and permanently stored could be accounted
for and how these negative emissions could be covered by emissions trading,if appropriate, including a clear scope and strict criteria and safeguards toensure that such removals are not offsetting necessary emissions reductionsin accordance with Union climate targets as laid down in Regulation (EU)2021/1119;(b)

the feasibility of lowering the 20 MW total rated thermal input thresholds forthe activities in Annex I of this Directive from 2031;

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(c)

whether all greenhouse gas emissions covered by this Directive are effectively
accounted for, and whether double counting is effectively avoided. In
particular, it shall assess the accounting of the greenhouse gas emissions
which are considered to have been captured and utilised in a product in away other than that referred to in paragraph 3b of Article 12.

4b.

When reviewing this Directive, in accordance with paragraphs 1, 2 and 3 of this
Article, the Commission shall analyse how linkages between the EU ETS andother carbon markets can be established, without impeding the achievement of theclimate-neutrality objective and the Union climate targets as laid down inRegulation (EU) 2021/1119.

4c.

By 31 July 2026, the Commission shall present a report to the European
Parliament and to the Council in which it shall assess the feasibility of including
municipal waste incineration installations in the EU ETS, including with a view totheir inclusion from 2028 and with an assessment of the potential need for a
possibility for a Member State to opt out until 31 December 2030. In that regard,
the Commission shall take into account the importance of all sectors contributing
to emission reductions and the potential diverting towards disposal of waste bylandfilling in the Union and waste exports to third countries. The Commission
shall in addition take into account relevant criteria such as the effects on theinternal market, potential distortions of competition, environmental integrity,alignment with the objectives of the Waste Framework Directive35 and robustness
and accuracy with respect to the monitoring and calculation of emissions. The
Commission shall, where appropriate and without prejudice to the provisions laid
down in Article 4 of Directive 2008/98/EC, present a legislative proposal
accompanying the report to apply the provisions of this Chapter to greenhouse gas
emissions permits and the allocation and issue of additional allowances in respectof municipal waste incineration installations and to prevent potential diverting.

35

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Directive 2008/98/EC of the European Parliament and of the Council of 19 November
2008 on waste and repealing certain Directives (OJ L 312, 22.11.2008, p. 3).
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In the report referred to in the first subparagraph, the Commission shall also
assess the possibility of including in the EU ETS other waste management
processes, in particular landfills which create methane and nitrous oxide emissions
in the Union. The Commission may, where appropriate, also accompany thatreport with a legislative proposal to include such other waste management
processes in the EU ETS.”;(21)

the following Chapter IVa is inserted after Article 30:“CHAPTER IVa
EMISSIONS TRADING SYSTEM FOR BUILDINGS, ROAD TRANSPORT AND
ADDITIONAL SECTORS
Article 30a
Scope
The provisions of this Chapter shall apply to emissions, greenhouse gas emission permits,issue and surrender of allowances, monitoring, reporting and verification in respect of theactivity referred to in Annex III. This Chapter shall not apply to any emissions covered by
Chapters II ▌ and III.
Article 30b
Greenhouse gas emissions permits
1.

Member States shall ensure that, from 1 January 2025, no regulated entity carries out
the activity referred to in Annex III unless that regulated entity holds a permit issued
by a competent authority in accordance with paragraphs 2 and 3.

2.

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the regulated entity;

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(b)

the type of fuels it releases for consumption and which are used for combustionin the ▌sectors ▌defined in Annex III and the means through which it releases
those fuels for consumption;(c)the end use(s) of the fuels released for consumption for the activity referred toin Annex III;(d)the measures planned to monitor and report emissions, in accordance with theacts referred to in Articles 14 and 30f;(e)
3.

a non-technical summary of the information under points (a) to (d).

The competent authority shall issue a greenhouse gas emissions permit granting
authorisation to the regulated entity referred to in paragraph 1 for the activity referred
to in Annex III, if it is satisfied that the entity is capable of monitoring and reporting
emissions corresponding to the quantities of fuels released for consumption pursuant
to Annex III.

4.

Greenhouse gas emissions permits shall contain, at least, the following:(a)the name and address of the regulated entity;(b)a description of the means by which the regulated entity releases the fuels for
consumption in the sectors covered by this Chapter;(c)a list of the fuels the regulated entity releases for consumption in the sectors
covered by this Chapter;(d)a monitoring plan that fulfils the requirements established by the acts referred
to in Article 14;(e)reporting requirements established by the acts referred to in Article 14;(f)

an obligation to surrender allowances, issued under this Chapter, equal to thetotal emissions in each calendar year, as verified in accordance with Article 15,
in accordance with the deadline provided in Article 30e(2).

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5.

Member States may allow the regulated entities to update monitoring plans withoutchanging the permit. Regulated entities shall submit any updated monitoring plans tothe competent authority for approval.

6.

The regulated entity shall inform the competent authority of any planned changes tothe nature of its activity or to the fuels it releases for consumption, which may
require updating the greenhouse gas emissions permit. Where appropriate, thecompetent authority shall update the permit in accordance with the acts referred to in
Article 14. Where there is a change in the identity of the regulated entity covered bythis Chapter, the competent authority shall update the permit to include the name andaddress of the new regulated entity.

Article 30c
Total quantity of allowances
1.

The Union-wide quantity of allowances issued under this Chapter each year from2027 shall decrease in a linear manner beginning in 2024. The 2024 value shall bedefined as the 2024 emissions limits, calculated on the basis of the reference
emissions under Article 4(2) of Regulation (EU) 2018/842 of the European
Parliament and of the Council(*) for the sectors covered by this Chapter andapplying the linear reduction trajectory for all emissions within the scope of that
Regulation. The quantity shall decrease each year after 2024 by a linear reduction
factor of 5,10 %. By 1 January 2025, the Commission shall publish the Union-wide
quantity of allowances for the year 2027.

2.

The Union-wide quantity of allowances issued under this Chapter each year from2028 shall decrease in a linear manner beginning from 2025 on the basis of theaverage emissions reported under this Chapter for the years 2024 to 2026. The
quantity of allowances shall decrease by a linear reduction factor of 5,38 %, except if
the conditions of point 1 of Annex IIIa apply, in which case, the quantity shalldecrease with a linear reduction factor adjusted in accordance with the rules set out
in point 2 of Annex IIIa. By 30 June 2027, the Commission shall publish the Unionwide quantity of allowances for the year 2028 and, if required, the adjusted linear
reduction factor.

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3.

The Union-wide quantity of allowances issued under this Chapter shall be adjusted
for each year from the year after the start of auctioning to compensate for thequantity of allowances surrendered in cases where it was not possible to avoid
double counting of emissions or where allowances have been surrendered foremissions not covered by this Chapter as referred to in Article 30f(4). The
adjustment shall correspond to the total amount of allowances covered by this
Chapter which were compensated for in the relevant reporting year pursuant to theacts referred to in Article 30f(4).

4.

A Member State having unilaterally included a regulated entity pursuant to Article
30j in the emissions trading established under this Chapter shall ensure that theregulated entity concerned submits by 30 April of the relevant year to the relevant
competent authority a duly substantiated report in accordance with the provisionsof Article 30f. If the data submitted are duly substantiated, the competent authority
shall notify the Commission thereof by 30 June of the relevant year. The quantityof allowances to be issued under paragraph 1 shall be adjusted taking into accountthe duly substantiated submitted report.

_________(*)

Regulation (EU) 2018/842 of the European Parliament and of the Council of 30 May
2018 on binding annual greenhouse gas emission reductions by Member States from2021 to 2030 contributing to climate action to meet commitments under the Paris
Agreement and amending Regulation (EU) No 525/2013 (OJ L 156, 19.6.2018, p.
26).

Article 30d
Auctioning of allowances for the activity referred to in Annex III
1.

From 2027, allowances covered by this Chapter shall be auctioned, unless they areplaced in the Market Stability Reserve established by Decision (EU) 2015/1814. The
allowances covered by this Chapter shall be auctioned separately from theallowances covered by Chapters II ▌ and III.

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2.

The auctioning of the allowances under this Chapter shall start in 2027 with avolume corresponding to 130 % of the auction volumes for 2027 established on thebasis of the Union-wide quantity of allowances for that year and the respective
auction shares and volumes pursuant to paragraphs 3 to 5. The additional volumes tobe auctioned shall only be used for surrendering allowances pursuant to
Article 30e(2) and may be auctioned until 31 May 2028. The additional volumes
shall be deducted from the auction volumes for the period from 2029 to 2031. The
conditions for these early auctions shall be set in accordance with paragraph 6 andArticle 10(4).
In 2027, 600 million allowances covered by this Chapter are created as holdings in
the Market Stability Reserve pursuant to Article 1a(3) of Decision (EU) 2015/1814.

3.

150 million allowances issued under this Chapter shall be auctioned and all revenues
from these auctions made available for the Social Climate Fund established byRegulation (EU) 20…/nn [Social Climate Fund Regulation] until 2032.

3a.

From the remaining amount of allowances and in order to generate, together withthe revenue from the allowances referred to in paragraph 3 and Article 10a(8b), a
maximum amount of EUR 65 000 000 000, the Commission shall ensure theauctioning of an additional volume of allowances covered by this Chapter thatshall be made available for the Social Climate Fund established by Regulation(EU) 20…/nn [Social Climate Fund Regulation] until 2032.
The Commission shall ensure that the allowances destined for the Social Climate
Fund referred to in paragraph 3 and in this paragraph are auctioned inaccordance with the principles and modalities of Article 10(4) and the delegatedact adopted in accordance with that provision.
The revenues from the auctioning of the allowances referred to in paragraph 3 andin this paragraph shall constitute external assigned revenue in accordance with
Article 21(5) of Regulation (EU, Euratom) 2018/1046, and shall be implemented inaccordance with the rules applicable to the Social Climate Fund.

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The annual amount allocated to the Social Climate Fund in accordance with
Article 10a(8b), paragraph 3 and this paragraph shall not exceed:(a)for 2026, EUR 4 000 000 000;(b)for 2027, EUR 10 900 000 000;(c)for 2028, EUR 10 500 000 000;(d)for 2029, EUR 10 300 000 000;(e)for 2030, EUR 10 100 000 000;(f)for 2031, EUR 9 800 000 000;(g)

for 2032, EUR 9 400 000 000.

Where the emissions trading established in accordance with this Chapter ispostponed until 2028 pursuant to Article 30k, the maximum amount to be madeavailable to the Social Climate Fund in accordance with the first subparagraphshall be EUR 54 600 000 000. In such a case, the annual amounts allocated to theFund shall not exceed cumulatively for 2026-2027, EUR 4 000 000 000, and forthe period from 1 January 2028 until 31 December 2032, the relevant annual
amount shall not exceed:

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In case revenue generated from the auctioning referred to in paragraph 4 isestablished as an own resource in accordance with Article 311(3) TFEU,
Article 10a(8b), paragraph 3 and this paragraph shall cease to apply.
4.

The total quantity of allowances covered by this Chapter after deducting thequantities set out in paragraphs 3 and 3a, shall be auctioned by the Member Statesand distributed amongst them in shares that are identical to the share of reference
emissions under Article 4(2) of Regulation (EU) 2018/842 for the categories ofemission sources referred to in paragraph 2 point (b) to (d) of Annex III for the
average of the period from 2016 to 2018, of the Member State concerned, ascomprehensively reviewed pursuant to Article 4(3) of that Regulation.

5.

Member States shall determine the use of revenues generated from the auctioning ofallowances referred to in paragraph 4, except for the revenues constituting externallyassigned revenue in accordance with paragraph 3a or the revenues established as
own resources in accordance with Article 311(3) TFEU and entered in the Union
budget. Member States shall use their revenues or the equivalent in financial valueof these revenues for one or more of the purposes referred to in Article 10(3), giving
priority to activities that can contribute to address social aspects of the emission
trading under this Chapter, or for one or more of the following:(a)measures intended to contribute to the decarbonisation of heating and coolingof buildings or to the reduction of the energy needs of buildings, including the
integration of renewable energies and related measures according to Articles
7(11), 12 and 20 of Directive 2012/27/EU [references to be updated with therevised Directive], as well as measures to provide financial support for lowincome households in worst-performing buildings;

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(b)

measures intended to accelerate the uptake of zero-emission vehicles or toprovide financial support for the deployment of fully interoperable refuelling
and recharging infrastructure for zero-emission vehicles or measures toencourage a shift to public forms of transport and improve multimodality, or toprovide financial support in order to address social aspects concerning low andmiddle-income transport users;(c)

to finance their Social Climate Plan in accordance with Article 14 ofRegulation (EU) 20…/nn [Social Climate Fund Regulation];(d)to provide financial compensation to the final consumers of the fuels in cases
where it was not possible to avoid double counting of emissions or where
allowances have been surrendered for emissions not covered by this Chapter
as referred to in Article 30f(4).

Member States shall be deemed to have fulfilled the provisions of this paragraph if
they have in place and implement fiscal or financial support policies or regulatory
policies, which leverage financial support, established for the purposes set out in thefirst subparagraph and which have a value equivalent to the revenues referred to in
the first subparagraph generated from the auctioning of allowances referred to inthis Chapter.
Member States shall inform the Commission as to the use of revenues and the actions
taken pursuant to this paragraph by including this information in their reports
submitted under Regulation (EU) 2018/1999 of the European Parliament and of theCouncil (**).

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6.

Articles 10(4) and 10(5) shall apply to the allowances issued under this Chapter.
_________(*)

Regulation (EU) 2018/1999 of the European Parliament and of the Council of
11 December 2018 on the Governance of the Energy Union and Climate
Action, amending Regulations (EC) No 663/2009 and (EC) No 715/2009 of theEuropean Parliament and of the Council, Directives 94/22/EC, 98/70/EC,
2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and 2013/30/EU of theEuropean Parliament and of the Council, Council Directives 2009/119/EC and(EU) 2015/652 and repealing Regulation (EU) No 525/2013 of the European
Parliament and of the Council (OJ L 328, 21.12.2018, p. 1).

(**) [insert reference]
Article 30eTransfer, surrender and cancellation of allowances1.

Article 12 shall apply to the emissions, regulated entities and allowances covered bythis Chapter with the exception of Article 12, paragraphs (2a), (3), (3a), paragraph(4), second and third sentence, and paragraph (5). For this purpose:(a)

any reference to emissions shall be read as if it were a reference to theemissions covered by this Chapter;(b)

any reference to operators of installations shall be read as if it were a reference
to the regulated entities covered by this Chapter;(c)

any reference to allowances shall be read as if it were a reference to theallowances covered by this Chapter.

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2.

From 1 January 2028, Member States shall ensure that, by 31 May each year, theregulated entity surrenders a number of allowances covered by this Chapter, that isequal to the total emissions, corresponding to the quantity of fuels released for
consumption pursuant to Annex III, during the preceding calendar year as verified inaccordance with Articles 15 and 30f, and that those allowances are subsequently
cancelled.

3.

Until 31 December 2030, by way of derogation from the first and second
paragraphs, where a regulated entity established in a given Member State is
subject to a national carbon tax in force for the years 2027 to 2030, covering anactivity referred to in Annex III, the competent authority of the Member State
concerned may exempt that regulated entity from the obligation to surrender
allowances under paragraph 2 for a given reference year, provided that:(a)the Member State concerned notifies the Commission of its national carbon
tax, covering an activity referred to in Annex III by 31 December 2023 andthe national law setting the tax rates applicable for the years 2027 to 2030
has, at that point in time, entered into force. The Member State concerned
shall notify the Commission of any subsequent change to the national carbon
tax;

(b)

for the reference year, the national carbon tax of the Member State
concerned effectively paid by that regulated entity is higher than the average
auction clearing price of the emissions trading system established under this
Chapter;(c)the regulated entity fully complies with the obligations under Article 30b on
the greenhouse emissions permits and Article 30f on the monitoring,
reporting and verification of its emissions;

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(d)

the Member State concerned notifies the Commission of the application of
any such exemption and the corresponding volume of allowances to becancelled in accordance with point (g) and the delegated acts adopted
pursuant to Article 10(4) by 31 May of the year after the reference year;(e)

the Commission does not raise an objection to the application of the
derogation on the ground that the measure notified is not in conformity withthe conditions set out in this paragraph, within three months from a
notification under point (a) or within one month after the notification for the
relevant year under point (d);(f)

the Member State concerned does not auction the volume of allowancesreferred to in Article 30d(4) for a particular reference year until the quantityof volume of allowances to be cancelled under this paragraph is determinedin accordance with point (g). The Member State concerned shall not auction
any of the additional volume of allowances pursuant to Article 30d(2), firstsubparagraph.

(g)

the Member State concerned cancels a volume of allowances from the total
quantity of allowances to be auctioned by it referred to in Article 30d(4) for
the reference year equal to the verified emissions of that regulated entity
under this Chapter for the reference year. Where the volume of allowancethat remains to be auctioned in the reference year following application ofpoint f) is below the volume of allowances to be cancelled under thisparagraph, the Member State concerned shall ensure that it cancels thevolume of allowances corresponding to the difference by the end of the year
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(h)

the Member State concerned commits, at the time of the first notification
under point (a), to use for one or more of the measures listed or referred to in
Article 30d(5), first subparagraph, an amount equivalent to the revenues towhich Article 30d(5) would have applied in the absence of this derogation.
The second and third subparagraph of Article 30d(5) shall apply and theCommission shall ensure that the information received pursuant thereto is inconformity with the commitment made.

The volume of allowances to be cancelled under point (g) shall not affect theexternally assigned revenue established pursuant to Article 30d(3a) or, where it
has been established pursuant to Article 311(3) TFEU, the own resources of theUnion budget pursuant to Council Decision (EU, Euratom) 2020/2053 from therevenues generated from auctioning of allowances in accordance with Article 30d.
4.

Hospitals which are not covered by Chapter III of this Directive may be provided
financial compensation for the cost passed on to them due to the surrender ofallowances under this Chapter. For this purpose, the provisions of this Chapter
applicable to the cases of double counting shall apply mutatis mutandis.

Article 30f
Monitoring, reporting, verification of emissions and accreditation
1.

Articles 14 and 15 shall apply to the emissions, regulated entities and allowances
covered by this Chapter. For this purpose:(a)

any reference to emissions shall be read as if it were a reference to theemissions covered by this Chapter;(b)

any reference to activity listed in Annex I shall be read as if it were a reference
to the activity referred to in Annex III;(c)any reference to operators shall be read as if it were a reference to the regulated
entities covered by this Chapter;

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(d)

any reference to allowances shall be read as if it were a reference to theallowances covered by this Chapter.

2.

Member States shall ensure that each regulated entity monitors for each calendar
year as from 2025 the emissions corresponding to the quantities of fuels released for
consumption pursuant to Annex III. They shall also ensure that each regulated entity
reports these emissions to the competent authority in the following year, starting in
2026, in accordance with the acts referred to in Article 14(1).

2a.

From 1 January 2028, Member States shall ensure that, by 30 April each year
until 2030, the regulated entity reports the average share of costs related to thesurrender of allowances under Chapter IVa of Directive 2003/87/EC which theypassed on to consumers for the preceding year. The Commission shall adopt
implementing acts concerning the requirements and templates for these reports.
These implementing acts shall be adopted in accordance with the examination
procedure referred to in Article 22a(2). The Commission shall assess the submitted
reports and annually report its findings to the European Parliament and theCouncil. In the case the Commission finds that improper practices exist withregard to the pass through of carbon costs, the report may be accompanied, if
appropriate, by legislative proposals aimed at addressing such improper practices.

3.

Member States shall ensure that each regulated entity holding a permit in accordancewith Article 30b on 1 January 2025 report their historical emissions for year 2024 by
30 April 2025.

4.

Member States shall ensure that the regulated entities are able to identify anddocument reliably and accurately per type of fuel, the precise volumes of fuelreleased for consumption which are used for combustion in the ▌sectors ▌identified
in Annex III, and the final use of the fuels released for consumption by the regulated
entities. The Member States shall take appropriate measures to limit the risk of
double counting of emissions covered under this Chapter and the emissions under
Chapters II ▌ and III, as well as the risk of allowances being surrendered foremissions not covered by this Chapter.

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The Commission shall adopt implementing acts concerning the detailed rules foravoiding double counting and allowances being surrendered for emissions notcovered by this Chapter, as well as for providing financial compensation to thefinal consumers of the fuels in cases where such double counting or surrender
may not be avoided. Those implementing acts shall be adopted in accordance withthe examination procedure referred to in Article 22a(2).The calculation of thefinancial compensation to the final consumers of the fuels shall be based on the
average price of allowances in the auctions carried out in accordance with the act
adopted under Article 10(4) in the relevant reporting year.
5.

The principles for monitoring and reporting of emissions covered by this Chapter are
set out in Part C of Annex IV.

6.

The criteria for the verification of emissions covered by this Chapter are set out inPart C of Annex V.

7.

Member States may allow simplified monitoring, reporting and verification
measures for regulated entities whose annual emissions corresponding to thequantities of fuels released for consumption are less than 1000 tonnes of carbon
dioxide equivalent, in accordance with the acts referred to in Article 14(1).

Article 30g
Administration
Articles 13, 15a, Article 16(1), (2), (3), (4) and (12), Articles 17, 18, 19, 20, 21, 22, 22a, 23
and 29 shall apply to the emissions, regulated entities and allowances covered by this
Chapter. For this purpose:(a)

any reference to emissions shall be read as if it were a reference to emissions coveredby this Chapter;(b)

any reference to operators shall be read as if it were a reference to regulated entities
covered by this Chapter;

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(c)

any reference to allowances shall be read as if it were a reference to the allowances
covered by this Chapter.

Article 30h
Measures in the event of excessive price increase
1.

Where, for more than three consecutive months, the average price of allowances in
the auctions carried out in accordance with the act adopted under Article 10(4) ismore than twice the average price of allowances during the six preceding
consecutive months in the auctions for the allowances covered by this Chapter, ▌ 50
million allowances covered by this Chapter shall be released from the Market
Stability Reserve in accordance with Article 1a(7) of Decision (EU) 2015/1814.
For the years 2027 and 2028, the conditions in the first sub-paragraph shall be met
where, for more than three consecutive months, the average price of allowance ismore than 1,5 times the average price of allowance during a reference period of
the six preceding consecutive months.

1a.

Where the average price of allowances referred to in paragraph 1 exceeds a priceof EUR 45 during a period of two consecutive months, 20 million allowances
covered by this Chapter shall be released from the Market Stability Reserve inaccordance with Article 1a(7) of Decision (EU) 2015/1814. The indexation to theEuropean index of consumer prices of 2020 shall apply. The mechanism under
this paragraph shall release allowances up to 31 December 2029.

2.

Where ▌ the average price of allowances referred to in paragraph 1 is more than
three times the average price of allowance during the six preceding consecutive
months, 150 million allowances covered by this Chapter shall be released from theMarket Stability Reserve in accordance with Article 1a(7) of Decision (EU)2015/1814.

2a.

Where a condition referred to in paragraph 1a has been met on the same day as
the condition in paragraphs 1 or 2, additional allowances shall be released only
pursuant to paragraphs 1 or 2.

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2b.

Before paragraph 1a ceases to apply, the Commission shall present a report to theEuropean Parliament and to the Council in which it assesses whether themechanism referred to in paragraph 1a has been effective and whether it should becontinued. The Commission shall, where appropriate, accompany that report witha legislative proposal to the European Parliament and to the Council to amend thisDirective to adjust that mechanism.

3.

Where a condition referred to in paragraph 1, 1a or 2 has been met and resulted ina release of allowances, additional allowances shall not be released pursuant tothis Article earlier than 12 months thereafter.

4.

Where, within the second half of the period of 12 months referred to in paragraph
3, the condition in paragraph 1a has been met again, the Commission shall,assisted by the Committee, established by Article 44 of Regulation (EU) 2018/1999,
assess the effectiveness of the measure and may by means of an implementing act
decide that paragraph 3 shall not apply. Those implementing acts shall be adopted
in accordance with the examination procedure referred to in Article 22a(2).

5.

Where a condition in paragraph 1, 1a or 2 has been met and paragraph 3 is notapplicable, the Commission shall promptly publish in the Official Journal the dateon which the condition in paragraph 1, 1a or 2 was met.

6.

Member States that are subject to the obligation to provide a corrective action planin accordance with Article 8 of Regulation (EU) 2018/842 shall take due accountof the effects of the release of additional allowances pursuant to paragraph 1aduring the previous two years when considering additional actions to be
implemented as referred to in Article 8(1)(c) in order to meet their obligations
under that Regulation.

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Article 30i
Review of this Chapter
By 1 January 2028, the Commission shall report to the European Parliament and to theCouncil on the implementation of the provisions of this Chapter with regard to theireffectiveness, administration and practical application, including on the application of therules under Decision (EU) 2015/1814▌. Where appropriate, the Commission shallaccompany this report with a proposal to the European Parliament and to the Council toamend this Chapter. By 31 October 2031 the Commission should assess the feasibility ofintegrating the sectors covered by Annex III in the Emissions Trading System covering thesectors listed in Annex 1 of Directive 2003/87/EC.
Article 30j
Procedures for unilateral extension of the activity referred to in Annex III to othersectors not subject to Chapter II and III
1.

From 2027 Member States may apply emission trading in accordance with this
Chapter in sectors not listed in Annex III, taking into account all relevant criteria,
in particular the effects on the internal market, potential distortions of competition,
the environmental integrity of the emission trading system established pursuant tothis Chapter and the reliability of the planned monitoring and reporting system,
provided that the extension of the activity is approved by the Commission.

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The Commission is empowered to adopt delegated acts in accordance with Article
23 concerning the approval of an extension, authorisation for the issue ofadditional allowances and authorisation of other Member States to extend theactivity. The Commission may also, when adopting such delegated acts,
supplement the extension with further rules governing measures to addresspossible instances of double counting, including for the issue of additional
allowances to compensate for allowances surrendered for use of fuels in activities
listed in Annex I. Any financial measures by the Member States in favour ofcompanies in sectors and subsectors which are exposed to a genuine risk of carbon
leakage due to significant indirect costs that are actually incurred fromgreenhouse gas emission costs passed on in fuel prices due to the unilateralextension shall be in accordance with State aid rules, and shall not cause undue
distortions of competition in the internal market.
2.

Additional allowances issued pursuant to an authorisation under this Article shallbe auctioned in line with the requirements laid down in Article 30d.
Notwithstanding Article 30d (1) to (5) the Member States having unilaterally
extended the activities shall determine the use of revenues generated from theauctioning of those additional allowances.

Article 30k
Postponement of emissions trading for buildings, road transport and additional sectors
until 2028 in the event of exceptionally high energy prices1.

By 15 July 2026, the Commission shall publish in the Official Journal whether one
or both of the following conditions were met:(a)the average TTF gas price of the six calendar months ending 30 June 2026 ishigher than the average TTF gas price in February and March 2022;

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(b)

the average Brent crude oil price of the six calendar months ending 30 June
2026 is more than 2 times the average Brent crude oil price during the five
preceding years. The five years reference period shall be the five-year periodthat ends before the first month of the period of the six calendar months.

2.

Where one or both of the conditions referred to in paragraph (1) are met, thefollowing rules shall apply:(a)by way of derogation from Article 30c(1), the first year for which the Unionwide quantity of allowances is established shall be 2028;(b)

by way of derogation from Articles 30d(1) and Article 30d(2), the start ofauctioning of allowances under this Chapter shall be postponed to 2028;(c)by way of derogation from Article 30d(2), the additional volumes ofallowances for the first year of auctions shall be deducted from the auction
volumes for the period from 2030 to 2032 and the initial holdings in themarket stability reserve shall be created in 2028;(d)by way of derogation from Article 30e(2), the deadline for initial
surrendering of allowances shall be postponed to 30 April 2029 for the total
emissions of the year 2028;(e)

by way of derogation from Article 30i, the deadline for the Commission toreport to the European Parliament and to the Council shall be postponed to 1
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(21b)

the following article is inserted:“Article 30ib
Scientific advice
The European Scientific Advisory Board on Climate Change established under Article
10a of Regulation (EC) No 401/2009 may, on its own initiative, provide scientific advice
and issue reports regarding this Directive. The Commission shall take into account therelevant advice and reports of the Advisory Board, in particular as regards:-

the need for additional Union policies and measures to ensure compliancewith the objectives and targets referred to in Article 30(3);-the need for additional Union policies and measures in view of agreements
on global measures within ICAO to reduce climate impact from aviation andthe ambition and environmental integrity of the global market-based
measure from the IMO referred to in Article 3ge.”;(21c)

the following Article is inserted after Article 30ib:“Article 30ic
Information, communication and publicity
1.

The Commission shall ensure the visibility of funding from EU ETS auctioning
revenues referred to in Article 10a(8) (Innovation Fund) of this Directive by:(a)ensuring that the beneficiaries of such funding acknowledge the origin of
those funds and ensure the visibility of the Union funding, in particularwhen promoting the projects and their results, by providing coherent,
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(b)

ensuring that the recipients of such funding use an appropriate label that
reads ‘(co-) funded from by the EU Emissions Trading System (theInnovation Fund)’, as well as the emblem of the Union and the amount offunding. Where the use of this label is not feasible, the Innovation Fundshall be mentioned in all communication activities, including on noticeboards at strategic places visible to the public.

The Commission shall in the delegated act referred to in Article 10a(8) set thenecessary requirements to ensure the visibility of funding from the Innovation
Fund, including the mentioning of that Fund.
2.

Member States shall ensure the visibility of funding from EU ETS auctioning
revenues referred to in Article 10d (Modernisation Fund) corresponding to what isreferred to in paragraph 1, points a) and b), including the mentioning of theModernisation Fund.

3.

Taking into account national circumstances, the Member States shall endeavour toensure the visibility of the source of the funding of actions or projects funded fromthe EU ETS auctioning revenues for which they determine the use as referred to in
Articles 3d(4), 10(3) and Article 30d (5).”;(22)

Annexes I, IIb, IV and V to Directive 2003/87/EC are amended in accordance with Annex
I to this Directive, and Annexes III and IIIa ▌are inserted in Directive 2003/87/EC as set
out in Annex I to this Directive.

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Article 2
Amendments to Decision (EU) 2015/1814
Decision (EU) 2015/1814 is amended as follows:(1)

Article 1 is amended as follows:(a)in paragraph 4, the first and second sentences are replaced by the following:“The Commission shall publish the total number of allowances in circulation eachyear by 1 June of the subsequent year. The total number of allowances in circulation
in a given year shall be the cumulative number of allowances issued in respect of
installations and shipping companies and not put in reserve in the period since 1
January 2008, including the number that were issued pursuant to Article 13(2) ofDirective 2003/87/EC as in force until 18 March 2018 in that period and entitlements
to use international credits exercised by installations under the EU ETS , up to 31
December of that given year, minus the cumulative tonnes of verified emissions frominstallations and shipping companies under the EU ETS between 1 January 2008
and 31 December of that same given year, and any allowances cancelled inaccordance with Article 12(4) of Directive 2003/87/EC.”;(b)

the following paragraph 4a is inserted:“4a. As from [the year following the entry into force of this Directive], thecalculation of the total number of allowances in circulation in any given year
shall include the cumulative number of allowances issued in respect of aviationand the cumulative tonnes of verified emissions from aviation under the EU
ETS, not including emissions from flights on routes covered by offsetting
calculated pursuant to Article 12(6), between 1 January [the year following
the entry into force of this Directive] and 31 of December of that year.
The allowances cancelled pursuant to Article 3ga of Directive 2003/87/EC
shall be considered as issued for the purposes of the calculation of the total
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(c)

paragraph 5 and 5a are replaced by the following:“5.

In any given year, if the total number of allowances in circulation is between
833 million and 1 096 million, a number of allowances equal to the difference
between the total number of allowances in circulation, as set out in the mostrecent publication as referred to in paragraph 4 of this Article, and 833 million,
shall be deducted from the volume of allowances to be auctioned by theMember States under Article 10(2) of Directive 2003/87/EC and shall beplaced in the reserve over a period of 12 months beginning on 1 September ofthat year. If the total number of allowances in circulation is above 1 096
million allowances, the number of allowances to be deducted from the volumeof allowances to be auctioned by the Member States under Article 10(2) ofDirective 2003/87/EC and to be placed in the reserve over a period of 12months beginning on 1 September of that year shall be equal to 12 % of thetotal number of allowances in circulation. By way of derogation from the lastsentence, until 31 December 2030, the percentage shall be doubled.
Without prejudice to the total amount of allowances to be deducted pursuant tothis paragraph, until 31 December 2030, allowances referred to in Article
10(2), first subparagraph, point (b), of Directive 2003/87/EC shall not be taken
into account when determining Member States' shares contributing to that total
amount.

5a.

Unless otherwise decided in the first review carried out in accordance with
Article 3, from 2023 allowances held in the reserve above 400 million
allowances shall no longer be valid.”;

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(d)

paragraph 7 replaced by the following:“7.

In any year, if paragraph 6 of this Article is not applicable and the conditionin the first paragraph of Article 29a of Directive 2003/87/EC have been met,
75 million allowances shall be released from the reserve and added to thevolume of allowances to be auctioned by the Member States under Article
10(2) of Directive 2003/87/EC. Where fewer than 75 million allowances arein the reserve, all allowances in the reserve shall be released under thisparagraph. Where the condition in paragraph 1 of Article 29a of Directive
2003/87/EC Article 29a is fulfilled, the volumes to be released from thereserve in accordance with that provision shall be evenly distributed during aperiod of three months, starting no later than two months from the date when
the condition in paragraph 1 of Article 29a of Directive 2003/87/EC is met as
notified by the Commission in accordance with the fourth sub-paragraphthereof.”;(2)

the following Article 1a is inserted:“Article 1a
Operation of the Market Stability Reserve for the buildings, road transport and additional
sectors
1.

Allowances covered by Chapter IVa of Directive 2003/87/EC shall be placed in andreleased from a separate section of the reserve established pursuant to Article 1 ofthis Decision, in accordance with the rules set out in this Article.

2.

The placing in the reserve under this Article shall operate from 1 September 2028.
The allowances covered by Chapter IVa of Directive 2003/87/EC shall be placed in,held in, and released from the reserve separately from the allowances covered by
Article 1 of this Decision.

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3.

In 2027, the section referred to in paragraph 1 shall be created in accordance with
Article 30d(2), second subparagraph, of Directive 2003/87/EC. By 1 January 2031,
the allowances referred to in this paragraph that are not released from the reserve
shall no longer be valid.

4.

The Commission shall publish the total number of allowances in circulation coveredby Chapter IVa of Directive 2003/87/EC each year, by 1 June of the subsequent year
separately from the number of allowances in circulation under Article 1(4). The total
number of allowances in circulation under this Article in a given year shall be thecumulative number of allowances covered by Chapter IVa of Directive 2003/87/EC
issued in the period since 1 January 2027, minus the cumulative tonnes of verified
emissions covered by Chapter IVa of Directive 2003/87/EC for the period between 1
January 2027 and 31 December of that same given year and any allowances coveredby Chapter IVa Directive 2003/87/EC cancelled in accordance with Article 12(4) of
Directive 2003/87/EC. The first publication shall take place by 1 June 2028.

5.

In any given year, if the total number of allowances in circulation, as set out in themost recent publication as referred to in paragraph 4 of this Article, is above 440
million allowances, 100 million allowances shall be deducted from the volume ofallowances covered by Chapter IVa to be auctioned by the Member States under
Article 30d of Directive 2003/87/EC and shall be placed in the reserve over a periodof 12 months beginning on 1 September of that year.

6.

In any given year, if the total number of allowances in circulation is fewer than 210
million, 100 million allowances covered by Chapter IVa shall be released from thereserve and added to the volume of allowances covered by Chapter IVa to be
auctioned by the Member States under Article 30d of Directive 2003/87/EC. Where
fewer than 100 million allowances are in the reserve, all allowances in the reserve
shall be released under this paragraph.

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7.

The volumes to be released from the reserve in accordance with Article 30h of
Directive 2003/87/EC shall be added to the volume of allowances covered by
Chapter IVa to be auctioned by the Member States under Article 30d of Directive
2003/87/EC. The volumes to be released from the reserve shall be evenly
distributed during a period of three months, starting no later than two months after
the date on which the conditions were met according to the publication thereof in
the Official Journal pursuant to Article 30h of Directive 2003/87/EC.

8.

Article 1(8) and Article 3 shall apply to the allowances covered by Chapter IVa of
Directive 2003/87/EC.

9.

By derogation from paragraphs 2 to 4, where one or both of the conditions referred
to in Article 30k(1) of Directive 2003/87/EC are met, the placing in the reserve
referred to in paragraph 2 shall operate from 1 September 2029 and the dates
referred to in paragraphs 3 and 4 shall be postponed by one year.”.

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(2a)

Article 3 is replaced by the following:“Article 3
Review
The Commission shall monitor the functioning of the reserve in the context of the reportprovided for in Article 10(5) of Directive 2003/87/EC. That report should consider
relevant effects on competitiveness, in particular in the industrial sector, including in
relation to GDP, employment and investment indicators. Within three years of the startof the operation of the reserve and at five-year intervals thereafter, the Commission
shall, on the basis of an analysis of the orderly functioning of the European carbon
market, review the reserve and submit a proposal, where appropriate, to the European
Parliament and to the Council. Each review shall pay particular attention to thepercentage figure for the determination of the number of allowances to be placed in thereserve pursuant to Article 1(5) of this Decision, the numerical value of the threshold forthe total number of allowances in circulation, including with a view to a potential
adjustment of this threshold in line with the linear factor referred to in Article 9 of
Directive 2003/87/EC, as well as the number of allowances to be released from thereserve pursuant to Article 1(6) or (7) of this Decision. In its review, the Commission
shall also look into the impact of the reserve on growth, jobs, and the Union's industrial
competitiveness and on the risk of carbon leakage.”▌
Article 3
Transposition

1.

Member States shall bring into force the laws, regulations and administrative provisions
necessary to comply with Article 1 ▌of this Directive by 31 December 2023. They shallapply those provisions from 1 January 2024.

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However, Member States shall bring into force the laws, regulations and administrative
provisions necessary to comply with the following articles by 30 June 2024:(i)

Article 1(2), points (x) to (zb), of this Directive;(ii)

Article 1(21) of this Directive with the exception of Article 30f(3) of Directive
2003/87/EC as inserted by that Article; and(iii) Article 1(22) of this Directive regarding Annexes III and IIIa of Directive
2003/87/EC as inserted by that Article.
They shall immediately inform the Commission thereof.
When Member States adopt those measures, they shall contain a reference to this Directive
or shall be accompanied by such ▌reference on the occasion of their official publication.
The methods of making such reference shall be laid down by Member States▌.
2.

Member States shall communicate to the Commission the text of the main measures ofnational law which they adopt in the field covered by this Directive.
Article 4
Transitional provisions

1.

When complying with their obligation set out in Article 3(1) of this Directive, Member
States shall ensure that their national legislation transposing Article 3, point (u), Article
10a(3) and 10a(4), Article 10c(7) and Annex I, points 1 and 3, of Directive 2003/87/EC, in
its version applicable on [the day before the date of entry into force of this Directive],
continue to apply until 31 December 2025. By way of derogation from the last sentence ofthe first subparagraph of Article 3(1), they shall apply their national measurestransposing amendments to those provisions from 1 January 2026.

▌

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Article 5
Entry into force and application

This Directive shall enter into force on the twentieth day following that of its publication in the
Official Journal of the European Union. Article 2 shall apply from 1 January 2024.
Article 6
Addressees

This Directive is addressed to the Member States. ▌Done at Brussels ..., ...

For the European Parliament
The President

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For the Council
The President

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ENANNEX
Annex I to Directive 2003/87/EC is amended as follows:▌ Points 1 and 3 are replaced by the following:“1.

Installations or parts of installations used for research, development and testing of
new products and processes are not covered by this Directive. Installations, where
during the preceding relevant five year period referred to in Article 11(1), second
subparagraph, emissions from the combustion of biomass that complies with thecriteria set out pursuant to Article 14 contribute on average to more than 95 % of thetotal average greenhouse gas emissions are not covered by this Directive.

3.

When the total rated thermal input of an installation is calculated in order to decideupon its inclusion in the EU ETS, the rated thermal inputs of all technical units
which are part of it, in which fuels are combusted within the installation, shall be
added together. These units may include all types of boilers, burners, turbines,
heaters, furnaces, incinerators, calciners, kilns, ovens, dryers, engines, fuel cells,
chemical looping combustion units, flares, and thermal or catalytic post-combustion
units. Units with a rated thermal input under 3 MW shall not be taken into accountfor the purposes of this calculation.”;▌ The table is amended as follows:(-i)

The first row is replaced by the following:

Combustion of fuels in installations with a total rated

Carbon dioxide

thermal input exceeding 20 MW (except ininstallations for the incineration of hazardous ormunicipal waste)
From 1 January 2024, combustion of fuels ininstallations for the incineration of municipal wastewith a total rated thermal input exceeding 20 MW, forthe purposes of Articles 14 and 15.

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(i)

The second row is replaced by the following:

Refining of oil, where combustion units with a total

Carbon dioxide";

rated thermal input exceeding 20 MW are operated(ii)

The fifth row is replaced by the following:“Production of iron or steel (primary or secondary

Carbon dioxide";fusion) including continuous casting, with a capacity
exceeding 2,5 tonnes per hour(iii) The seventh row is replaced by the following:“Production of primary aluminium or alumina

Carbon dioxide andperfluorocarbons";(iv) The fifteenth row of categories of activities is replaced by the following:“Drying or calcination of gypsum or production of

Carbon dioxide";plaster boards and other gypsum products, with aproduction capacity of calcined gypsum or dried
secondary gypsum exceeding a total of 20 tonnes perday(v)

The eighteenth row is replaced by the following:“Production of carbon black involving the carbonisation Carbon dioxide";of organic substances such as oils, tars, cracker anddistillation residues with a production capacity
exceeding 50 tonnes per day(vi) The twenty-fourth row is replaced by the following:“Production of hydrogen (H2) and synthesis gas with a

Carbon dioxide";

production capacity exceeding 5 tonnes per day

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(vii) The twenty-seventh row is replaced by the following:“Transport of greenhouse gases for geological storage in

Carbon dioxide";a storage site permitted under Directive 2009/31/EC,
with the exclusion of those emissions covered by anotheractivity under this Directive(viii) the following row is added after the last new row, with a separation line in between:“Maritime transport

Carbon dioxide;

Maritime transport activities ▌covered by Regulation

From 1 January 2026:(EU) 2015/757 of the European Parliament and of themethane and nitrous

Council ▌with the exception of the maritime transport

oxide”;

activities covered by Article 2(1a) and, until 31
December 2026, Article 2(1b) of that Regulation(1)

Annex IIb to Directive 2003/87/EC is replaced by the following:“ANNEX IIb
Part A - DISTRIBUTION OF FUNDS FROM THE MODERNISATION FUNDCORRESPONDING TO ARTICLE 10(1), THIRD SUBPARAGRAPH
Share

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Bulgaria

5,84 %

Czechia

15,59 %

Estonia

2,78 %

Croatia

3,14 %

Latvia1,44 %

Lithuania

2,57 %

Hungary

7,12 %

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Poland43,41 %

Romania

11,98 %

Slovakia

6,13 %Part B - DISTRIBUTION OF FUNDS FROM THE MODERNISATION FUNDCORRESPONDING TO ARTICLE 10(1), FOURTH SUBPARAGRAPH
Share

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Bulgaria

4,9 %Czechia

12,6 %

Estonia

2,1 %Greece10,1 %

Croatia

2,3 %Latvia1,0 %Lithuania

1,9 %Hungary

5,8 %Poland34,2 %

Portugal8,6 %Romania

9,7 %Slovakia

4,8 %Slovenia

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(2)

The following Annexes are inserted as Annexes III and IIIa ▌to Directive 2003/87/EC:“ANNEX III
ACTIVITY COVERED BY CHAPTER IVa

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Activity:

Greenhouse gases

1. Release for consumption of fuels which are used for

Carbon dioxide (CO2)

combustion in the sectors of buildings and road transport andadditional sectors.
This activity shall not include:(a) the release for consumption of fuels used in the activities set
out in Annex I to this Directive, except if used for combustion in
the activities of transport of greenhouse gases for geologicalstorage (activity row twenty seven) or if used for combustion in
installations excluded under Article 27a of this Directive;(b) the release for consumption of fuels for which the emission
factor is zero;(c) the release for consumption of hazardous or municipal waste
used as fuel.
2. The sectors of buildings and road transport shall correspond to
the following sources of emissions, defined in 2006 IPCC
Guidelines for National Greenhouse Gas Inventories, with thenecessary modifications to those definitions as follows:(a) Combined Heat and Power Generation (CHP) (source
category code 1A1a ii) and Heat Plants (source category code
1A1a iii), insofar as they produce heat for categories under (c)and (d) of this point, either directly or through district heating
networks;(b) Road Transportation (source category code 1A3b), excluding
the use of agricultural vehicles on paved roads;(c) Commercial / Institutional (source category code 1A4a);(d) Residential (source category code 1A4b).

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EN3. Additional sectors shall correspond to the following sourcesof emissions, defined in 2006 IPCC Guidelines for National
Greenhouse Gas Inventories:(a) Energy industries (source category code 1A1), excluding thecategories defined under paragraph 2 point (a) of this Annex;(b) Manufacturing Industries and Construction (source
category code 1A2).

_________
ANNEX IIIa
ADJUSTMENT OF LINEAR REDUCTION FACTOR IN ACCORDANCE WITH
ARTICLE 30c(2)1.

If the average emissions reported under Chapter IVa for the years 2024 to 2026 are
more than 2% higher compared to the value of the 2025 quantity defined inaccordance with Article 30c(1), and if these differences are not due to the differenceof less than 5% between the emissions reported under Chapter IVa and the inventory
data of 2025 Union greenhouse gas emissions from UNFCCC source categories forthe sectors covered under Chapter IVa, the linear reduction factor shall be calculated
by adjusting the linear reduction factor referred to in Article 30c(1).

2.

The adjusted linear reduction factor in accordance with point 1 shall be determined
as follows:▌LRFadj = 100%* [MRV[2024-2026] – ▌(ESR[2024] - 6* LRF2024* ESR[2024])]/ (5* MRV[20242026]), where,

LRFadj is the adjusted linear reduction factor;

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MRV[2024-2026] is the average of verified emissions under Chapter IVa for the years 2024 to2026;
ESR[2024] is the value of 2024 emissions defined in accordance with Article 30c(1) for thesectors covered under Chapter IVa;
LRF2024 is the linear reduction factor referred to in Article 30c(1).▌”_________(3)

Annex IV to Directive 2003/87/EC is amended as follows:(a)in Part A, the section “Calculation” is amended as follows:(i)in the fourth subparagraph, the last sentence “The emission factor for biomass
shall be zero.” is replaced by the following:“The emission factor for biomass that complies with the sustainability criteria
and greenhouse gas emission saving criteria for the use of biomass establishedby Directive (EU) 2018/2001, with any necessary adjustments for application
under this Directive, as set out in the implementing acts referred to in Article
14, shall be zero.”;(ii)

the sixth subparagraph is replaced by the following:“Default oxidation factors developed pursuant to Directive 2010/75/EU shallbe used, unless the operator can demonstrate that activity-specific factors are
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(b)

in Part B, section “Monitoring of carbon dioxide emissions”, fourth subparagraph,the last sentence “The emission factor for biomass shall be zero.” is replaced by thefollowing:“The emission factor for biomass that complies with the sustainability criteria andgreenhouse gas emission saving criteria for the use of biomass established by
Directive (EU) 2018/2001, with any necessary adjustments for application under thisDirective, as set out in the implementing acts referred to in Article 14, shall be
zero.”;(c)the following Part C is added:“PART C — Monitoring and reporting of emissions corresponding to the activity
referred to in Annex III
Monitoring of emissions
Emissions shall be monitored by calculation.
Calculation
Emissions shall be calculated using the following formula:
Fuel released for consumption × emission factor
Fuel released for consumption shall include the quantity of fuel released for
consumption by the regulated entity.
Default IPCC emission factors, taken from the 2006 IPCC Inventory Guidelines orsubsequent updates of these Guidelines, shall be used unless fuel-specific emission
factors identified by independent accredited laboratories using accepted analyticalmethods are more accurate.
A separate calculation shall be made for each regulated entity, and for each fuel.

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Reporting of emissions
Each regulated entity shall include the following information in its report:
A.

Data identifying the regulated entity, including:—name of the regulated entity;—

its address, including postcode and country;—

type of the fuels it releases for consumption and its activities throughwhich it releases the fuels for consumption, including the technology
used;

B.

—

address, telephone, fax and email details for a contact person; and—name of the owner of the regulated entity, and of any parent company.

For each type of fuel released for consumption and which is used for
combustion in the ▌sectors ▌defined in Annex III, for which emissions arecalculated:—

quantity of fuel released for consumption;—

emission factors;—

total emissions;—end use(s) of the fuel released for consumption; and—uncertainty.

Member States shall take measures to coordinate reporting requirements withany existing reporting requirements in order to minimise the reporting burden
on businesses.”;

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(4)

in Annex V to Directive 2003/87/EC, the following Part C is added:“PART C — Verification of emissions corresponding to the activity referred to in Annex
III
General Principles
1.

Emissions corresponding to the activity referred to in Annex III shall be subject toverification.

2.

The verification process shall include consideration of the report pursuant to Article
14(3) and of monitoring during the preceding year. It shall address the reliability,
credibility and accuracy of monitoring systems and the reported data and information
relating to emissions, and in particular:

3.

(a)

the reported fuels released for consumption and related calculations;(b)the choice and the employment of emission factors;(c)

the calculations leading to the determination of the overall emissions.

Reported emissions may only be validated if reliable and credible data andinformation allow the emissions to be determined with a high degree of certainty. A
high degree of certainty requires the regulated entity to show that:(a)the reported data is free of inconsistencies;(b)the collection of the data has been carried out in accordance with the applicablescientific standards; and(c)4.

the relevant records of the regulated entity are complete and consistent.

The verifier shall be given access to all sites and information in relation to the subjectof the verification.

5.

The verifier shall take into account whether the regulated entity is registered under
the Union Eco-Management and Audit Scheme (EMAS).

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Methodology
Strategic analysis
6.

The verification shall be based on a strategic analysis of all the quantities of fuelsreleased for consumption by the regulated entity. This requires the verifier to have an
overview of all the activities through which the regulated entity is releasing the fuels
for consumption and their significance for emissions.

Process analysis
7.

The verification of the information submitted shall, where appropriate, be carried out
on the site of the regulated entity. The verifier shall use spot-checks to determine thereliability of the reported data and information.

Risk analysis
8.

The verifier shall submit all the means through which the fuels are released for
consumption by the regulated entity to an evaluation with regard to the reliability ofthe data on the overall emissions of the regulated entity.

9.

On the basis of this analysis the verifier shall explicitly identify any element with ahigh risk of error and other aspects of the monitoring and reporting procedure which
are likely to contribute to errors in the determination of the overall emissions. This
especially involves the calculations necessary to determine the level of the emissions
from individual sources. Particular attention shall be given to those elements with ahigh risk of error and the abovementioned aspects of the monitoring procedure.

10.

The verifier shall take into consideration any effective risk control methods appliedby the regulated entity with a view to minimising the degree of uncertainty.

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Report11.

The verifier shall prepare a report on the validation process stating whether the reportpursuant to Article 14(3) is satisfactory. This report shall specify all issues relevantto the work carried out. A statement that the report pursuant to Article 14(3) issatisfactory may be made if, in the opinion of the verifier, the total emissions are notmaterially misstated.

Minimum competency requirement for the verifier
12.

The verifier shall be independent of the regulated entity, carry out his or her activities
in a sound and objective professional manner, and understand:(a)the provisions of this Directive, as well as relevant standards and guidance
adopted by the Commission pursuant to Article 14(1);(b)

the legislative, regulatory, and administrative requirements relevant to theactivities being verified; and(c)the generation of all information related to all the means through which thefuels are released for consumption by the regulated entity, in particular,
relating to the collection, measurement, calculation and reporting of data.”.

________________

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ANNEX II
2021/0211(COD) – MRVREGULATION (EU) 2023/...
OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of ...

amending ▌Regulation (EU) 2015/757 in order to provide for the inclusion of maritime
transport activities in the EU Emissions Trading System and of other greenhouse gases than CO2(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union, and in particular Article
192(1) thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national parliaments,
Having regard to the opinion of the European Economic and Social Committee36,
Having regard to the opinion of the Committee of the Regions37,
Acting in accordance with the ordinary legislative procedure38,

36
37
38

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OJ C 152, 6.4.2022, p. 175.
OJ C 301, 5.8.2022, p. 116.
Position of the European Parliament of ... (not yet published in the Official Journal) anddecision of the Council of ...
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Whereas:(1)

The Paris Agreement, adopted in December 2015 under the United Nations Framework
Convention on Climate Change (UNFCCC) entered into force in November 2016 (‘theParis Agreement’)39. Its Parties have agreed to hold the increase in the global averagetemperature well below 2 °C above pre-industrial levels and to pursue efforts to limit thetemperature increase to 1,5 °C above pre-industrial levels. This has been reinforced withthe adoption of the Glasgow Climate Pact in November 2021, in which the Conferenceof the Parties recognises that the impacts of climate change will be much lower at thetemperature increase of 1,5 ºC, compared with 2 ºC, and resolve to pursue efforts to limit
the temperature increase to 1,5 ºC.

(1a)

The urgency of the need to keep the Paris Agreement goal of 1,5 °C alive has become
more significant following the findings of the IPCC Sixth Assessment Report, that global
warming can only be limited to 1.5 °C, if strong and sustained reductions in global
greenhouse gas (GHG) emissions within this decade are immediately undertaken.

(2)

Tackling climate and environmental-related challenges and reaching the objectives of theParis Agreement are at the core of the Communication on “The European Green Deal”,
adopted by the Commission on 11 December 201940.

39
40

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Paris Agreement (OJ L 282, 19.10.2016, p. 4).
COM(2019)640 final.
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(3)

The European Green Deal combines a comprehensive set of mutually reinforcing measuresand initiatives aimed at achieving climate neutrality in the EU by 2050, and sets out a new
growth strategy that aims to transform the Union into a fair and prosperous society, with amodern, resource-efficient and competitive economy, where economic growth isdecoupled from resource use. It also aims to protect, conserve and enhance the Union's
natural capital, and protect the health and well-being of citizens from environment-relatedrisks and impacts. This transition affects workers from various sectors differently. At thesame time, that transition has gender equality aspects as well as has a particular impact onsome disadvantaged and vulnerable groups, such as older people, persons with disabilities,
persons with a minority racial or ethnic background and low and lower-middle income
individuals and households. It also imposes greater challenges on certain regions, inparticular structurally disadvantaged and peripheral regions, as well as islands. It must
therefore be ensured that the transition is just and inclusive, leaving no one behind.

(4)

The necessity and value of delivering on the European Green Deal have only grown inlight of the very severe effects of the COVID-19 pandemic on the health, living andworking conditions and well-being of the Union’s citizens, which have shown that oursociety and our economy need to improve their resilience to external shocks and act early
to prevent or mitigate them in a manner that is just and results in no one being left
behind, including those at risk of energy poverty. European citizens continue to express
strong views that this applies in particular to climate change ▌.

(5)

The Union committed to reduce the Union’s economy-wide net greenhouse gas emissions
by at least 55 % by 2030 below 1990 levels in the updated nationally determined
contribution submitted to the UNFCCC Secretariat on 17 December 202041.

41

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https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/
European%20Union%20First/EU_NDC_Submission_December%202020.pdf
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(6)

In Regulation (EU) 2021/1119 of the European Parliament and of the Council42 the Union
has enshrined in legislation the target of economy-wide climate neutrality by 2050, at thelatest, and the aim to achieve negative emissions thereafter. That Regulation alsoestablishes a binding Union domestic reduction commitment of net greenhouse gas
emissions (emissions after deduction of removals) of at least 55 % below 1990 levels by2030. That Regulation also establishes that the Commission should endeavour to alignall future legislative and budgetary proposals with the objectives and targets set out inthat Regulation and, in any case of non-alignment, provide the reasons as part of the
impact assessment accompanying those proposals.

(7)

All sectors of the economy need to contribute to achieving those emission reductions.
▌Directive 2003/87/EC is therefore being amended to include the maritime transport
sector in the EU ETS in order to ensure that that sector contributes to the increased
climate objectives of the Union as well as to the objectives of the Paris Agreement. It istherefore also necessary to amend Regulation (EU) 2015/757 to take into account theinclusion of the maritime transport sector in the EU ETS. (recital 7 and ex. recital 67)

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Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June
2021 establishing the framework for achieving climate neutrality and amending
Regulations (EC) No 401/2009 and (EU) 2018/1999 (‘European Climate Law’) (OJ L 243,9.7.2021, p. 1).
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(8)

Furthermore, to take into account the increased climate objectives of the Union as wellas the objectives of the Paris Agreement, the scope of Regulation (EU) 2015/757 should
be amended. A robust monitoring, reporting and verification system is a prerequisite forany market-based measure, efficiency standard or other measure, whether applied atUnion level or globally. While CO2 emissions represent the large majority of shipping
emissions, methane and nitrous oxide emissions represent a relevant share of shipping
emissions. The inclusion of methane and nitrous oxide emissions in Regulation (EU)2015/757 would be beneficial for environmental integrity and incentivising goodpractices, and should be implemented as from 2024. General cargo ships below 5 000
gross tonnage but not below 400 gross tonnage represent a significant share ofemissions of all general cargo ships. To increase the environmental effectiveness of the
MRV system, ensure a level-playing field and reduce the risk of circumvention, generalcargo ships below 5 000 gross tonnage but not below 400 gross tonnage should be
included in Regulation (EU) 2015/757 as from 2025. Offshore ships emit a relevant
share of emissions. Therefore, Regulation (EU) 2015/757 should also apply to offshore
ships above 400 gross tonnage as from 2025. The Commission should assess before 31
December 2024 whether additional ship types below 5 000 gross tonnage but not below
400 gross tonnage should be included in that Regulation.

(9)

Regulation (EU) 2015/757 should be amended to oblige companies to report aggregatedemissions data at company level and to submit for approval their verified monitoring plans
to the responsible administering authority and submit aggregated emissions data at
company level to the responsible administering authority. When performing theverifications at company level, the verifier should not verify the emissions report at shiplevel and the reports referred to in Article 11(2) of that Regulation, as those reports atship level would have been already verified. To ensure coherence in administration andenforcement, the entity responsible for compliance with Regulation (EU) 2015/757
should be the same as the entity responsible for compliance with Directive 2003/87/EC.
(ex. recital 67)

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(10)

In order to ensure the effective functioning of the EU ETS at administrative level and to
take into account the inclusion of methane and nitrous oxide emissions in the scope ofRegulation (EU) 2015/757, as well as the emissions from offshore ships, the power toadopt acts in accordance with Article 290 of the Treaty on the Functioning of the European
Union should be delegated to the Commission in respect of the monitoring methods andrules and the reporting rules for emissions covered by Regulation (EU) 2015/757, as wellas any other relevant information set out in that Regulation, the rules for the approval ofmonitoring plans and changes thereof by administering authorities, the rules for themonitoring, reporting and submission of aggregated emissions data at company level
and the rules for verification of aggregated emissions data at company level and for theissuance of verification reports in respect of aggregated emissions data at company level.
It is of particular importance that the Commission carry out appropriate consultations
during its preparatory work, including at expert level, and that those consultations be
conducted in accordance with the principles laid down in the Interinstitutional Agreement▌of 13 April 2016 on Better Law-Making43. In particular, to ensure equal participation in
the preparation of delegated acts, the European Parliament and the Council receive all
documents at the same time as Member States' experts, and their experts systematicallyhave access to meetings of Commission expert groups dealing with the preparation ofdelegated acts. (ex. recital 60)(11)Since the objectives of this Regulation, namely to provide for monitoring, reporting andverification rules that are necessary for an extension of the EU ETS to maritime
transport activities and to provide for the monitoring, reporting and verification ofemissions of additional greenhouse gases and ship types, cannot be sufficiently achievedby the Member States but can rather, by reason of its scale and effects, be better
achieved at Union level, the Union may adopt measures, in accordance with theprinciple of subsidiarity as set out in Article 5 of the Treaty on European Union. In
accordance with the principle of proportionality as set out in that Article, this Regulation
does not go beyond what is necessary in order to achieve those objectives.

43

OJ L 123, 12.5.2016, p. 1.

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(12)

Regulation (EU) 2015/757 should therefore be amended accordingly, (ex. recital 68)

HAVE ADOPTED THIS REGULATION:

Article 1
Amendments to Regulation (EU) 2015/757
Regulation (EU) 2015/757 is amended as follows:(-1)

the title is replaced by the following:‘Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April
2015 on the monitoring, reporting and verification of greenhouse gas emissions frommaritime transport, and amending Directive 2009/16/EC’;(-1a)

throughout the Regulation, except in Articles 1 and 2, Article 3, point (a), and Article
21(5) and Annexes I and II, the term 'CO2' is replaced by 'greenhouse gas' and anynecessary grammatical changes are made;(-1b)

Article 1 is replaced by the following:‘Article 1
Subject matter
This Regulation lays down rules for the accurate monitoring, reporting and verificationof greenhouse gas emissions and of other relevant information from ships arriving at,within or departing from ports under the jurisdiction of a Member State, in order topromote the reduction of greenhouse gas emissions from maritime transport in a costeffective manner.’;

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(-1c)in Article 2, paragraph 1 is replaced by the following:‘1.

This Regulation applies to ships of 5,000 gross tonnage and above in respect of
the greenhouse gas emissions released during their voyages for transporting, forcommercial purposes, cargo or passengers from their last port of call to a port ofcall under the jurisdiction of a Member State and from a port of call under thejurisdiction of a Member State to their next port of call, as well as within ports ofcall under the jurisdiction of a Member State.

1a.

From 1 January 2025, this Regulation shall also apply to general cargo ships
below 5 000 gross tonnage but not below 400 gross tonnage in respect of thegreenhouse gas emissions released during their voyages for transporting cargo forcommercial purposes from their last port of call to a port of call under thejurisdiction of a Member State and from a port of call under the jurisdiction of a
Member State to their next port of call, as well as within ports of call under thejurisdiction of a Member State and to offshore ships below 5 000 gross tonnage
but not below 400 gross tonnage in respect of the greenhouse gas emissions
released during their voyages from their last port of call to a port of call under thejurisdiction of a Member State and from a port of call under the jurisdiction of a
Member State to their next port of call, as well as within ports of call under thejurisdiction of a Member State.

1b.

From 1 January 2025, this Regulation shall apply to offshore ships of 5 000 gross
tonnage and above in respect of the greenhouse gas emissions released during
their voyages from their last port of call to a port of call under the jurisdiction of a
Member State and from a port of call under the jurisdiction of a Member State totheir next port of call, as well as within ports of call under the jurisdiction of a
Member State.

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1c.

The greenhouse gases covered by this Regulation are:(a)carbon dioxide (CO2);(b)with regard to emissions from 2024 onwards, methane (CH4); and(c)with regard to emissions from 2024 onwards, nitrous oxide (N2O).

Where this Regulation refers to total aggregated emissions of greenhouse gases or
total aggregated greenhouse gas emitted, it shall be understood as referring to thetotal aggregated amounts of each gas separately.’;(1)▌Article 3 is amended as follows:(a)point (a) is replaced by the following:‘(a) “greenhouse gas emissions” means the release of the greenhouse gases
covered by this Regulation in accordance with Article 2(1c) by ships;’;(b)

points (b), (c), (d) and (m) are replaced by the following:‘(b) “port of call” means a port of call as defined in Article 3, point (wa), of
Directive 2003/87/EC of the European Parliament and of the Council;(c)“voyage” means any movement of a ship that originates from or terminatesin a port of call;(d)“company” means the shipping company as defined in Article 3, point (v), of
Directive 2003/87/EC;(m) “reporting period” means the period from 1 January until 31 December ofany given calendar year; for voyages starting and ending in two different
calendar years, the respective data shall be accounted under the calendar
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(c)

the following points (q) and (r) are added:‘(q) “administering authority” means the administering authority in respect of ashipping company referred to in Article 3gd of Directive 2003/87/EC of theEuropean Parliament and of the Council(*);(r)“aggregated emissions data at company level” means the sum of thegreenhouse gas emissions relating to gases listed in Annex I to Directive
2003/87/EC with regard to maritime transport activities in accordance with
Annex I to that Directive and to be reported under that Directive, in respectof all ships under its responsibility during the reporting period.

_________(*)

Directive 2003/87/EC of the European Parliament and of the Council of 13
October 2003 establishing a system for greenhouse gas emission allowance
trading within the Union and amending Council Directive 96/61/EC (OJ L 275
25.10.2003, p. 32).’;(2)

in Article 4, the following paragraph 8 is added:‘8.

Companies shall report the aggregated emissions data at company level of the ships
under their responsibility during a reporting period pursuant to Article 11a.’;6210/23
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(3)

in Article 5, paragraph 2 is replaced by the following:‘2.

The Commission is empowered to adopt delegated acts in accordance with Article 23
to amend Annexes I and II to this Regulation, in order to take into account theinclusion of methane and nitrous oxide emissions, as well as the inclusion ofemissions from offshore ships, in the scope of this Regulation, amendments of
Directive 2003/87/EC, as well as to align those Annexes with the implementing acts
adopted under Article 14(1) of that Directive, relevant international rules as well asinternational and European standards. The Commission is also empowered to adopt
delegated acts in accordance with Article 23 to amend Annexes I and II to thisRegulation in order to refine the elements of the monitoring methods set out therein,in the light of technological and scientific developments and in order to ensure theeffective operation of the EU ETS established pursuant to Directive 2003/87/EC.
The Commission shall adopt the delegated acts to take into account the inclusionof methane and nitrous oxide emissions in the scope of this Regulation, as referred
to in the first subparagraph of this paragraph, by 1 October 2023. The methods formonitoring such emissions shall be based on the same principles as the methods
for monitoring CO2 emissions as set out in Annex I, with any adjustments
necessary to reflect the nature of the relevant greenhouse gas emissions. The
methods set out in Annex I and the rules set out in Annex II shall, whereappropriate, be aligned with the methods and rules set out in Regulation [xxx/yyyy]
on [FuelEU Maritime, 2021/0210 (COD)].’;(4)

Article 6 is amended as follows:(-a) paragraph 3, point (b) is replaced by the following:‘(b) the name of the company and the address, telephone and e-mail details of acontact person and the IMO unique company and registered owneridentification number;’;

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(a)

paragraph 5 is replaced by the following:‘5.

Companies shall use standardised monitoring plans based on templates andmonitoring plans shall be submitted using automated systems and dataexchange formats. Those templates, including the technical rules for theiruniform application and automatic transfer, shall be determined by theCommission by means of implementing acts. Those implementing acts shall be
adopted in accordance with the examination procedure referred to in Article
24(2).’;(b)

the following paragraphs 6, 7 and 8 are added:‘6.

By 1 April 2024, companies shall submit to the responsible administering
authority a monitoring plan for each of their ships falling under the scope of
this Regulation, which shall first be assessed as being in conformity with thisRegulation by the verifier and which shall reflect the inclusion of methaneand nitrous oxide emissions in the scope of this Regulation.

7.

Notwithstanding paragraph 6, for ships falling under the scope of thisRegulation for the first time after 1 January 2024, companies shall submit amonitoring plan in conformity with the requirements of this Regulation to the
responsible administering authority without undue delay and no later than threemonths after each ship's first call in a port under the jurisdiction of a Member
State.

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8.

By ... [two years after the date of entry into force of this amending
Regulation], the responsible administering authorities shall approve themonitoring plans submitted by companies in accordance with the rules laid
down in the delegated acts adopted by the Commission pursuant to the second
subparagraph. For ships falling under the scope of [revised ETS Directive] forthe first time after 1 January 2024, the responsible administering authority
shall approve the submitted monitoring plan within four months after the ship’s
first call in a port under the jurisdiction of a Member State in accordance withthe rules laid down in the delegated acts adopted by the Commission pursuant
to the second subparagraph.
By 1 October 2023, the Commission shall adopt delegated acts in accordancewith Article 23 to amend Articles 6, 7, 8, 9 and 10 of this Regulation
concerning the rules for monitoring plans to take account of the inclusion of
methane and nitrous oxide emissions, as well as emissions from offshore
ships, in the scope of this Regulation.
The Commission is empowered to adopt delegated acts in accordance with
Article 23 to supplement this Regulation concerning rules for the approval ofmonitoring plans by administering authorities.’;(5)

Article 7 is amended as follows:(a)in paragraph 4, the second sentence is replaced by the following:‘Following the assessment, the verifier shall notify the company whether thosemodifications are in conformity. The company shall submit its modified monitoringplan to the responsible administering authority once it has received a notification fromthe verifier that the monitoring plan is in conformity.’;6210/23
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(b)

the following paragraph 5 is added:‘5.

The administering authority shall approve modifications of the monitoring planunder paragraph 2, points (a), (b), (c), (d), in accordance with the rules laid
down in the delegated acts adopted by the Commission pursuant to the second
subparagraph of this paragraph.
The Commission is empowered to adopt delegated acts in accordance with
Article 23 to supplement this Regulation concerning rules for the approval ofchanges in the monitoring plans by administering authorities.’;(6)

in Article 10, first subparagraph, the following point (k) is added:‘(k) total aggregated ▌emissions of greenhouse gases covered by Directive 2003/87/EC
in relation to maritime transport activities in accordance with Annex I to that
Directive to be reported under that Directive ▌ in relation to maritime transport
activities, together with the necessary information to justify the application of any
relevant derogation from Article 12(3) of that Directive provided for in Article 12,
paragraphs 3-e, 3-d, 3-c and 3-b thereof.’;(6a)in Article 11, paragraph 1 the following subparagraph is added:‘Starting from 2025 and by 31 March of each year, companies shall submit to their
responsible administering authority, to the authorities of the flag States concerned for ships
flying the flag of a Member State and to the Commission an emissions report for the entire
reporting period for each ship under their responsibility, which has been verified assatisfactory by a verifier in accordance with Article 13. The administering authority may
require companies to submit their emissions reports by a date earlier than 31 March, but
not earlier than by 28 February.’;

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(6b)

in Article 11, paragraph 2 is replaced by the following:‘2.

Where there is a change of company, the previous company shall submit to their
responsible administering authority, to the authorities of the flag States concerned
for ships flying the flag of a Member State, to the new company and to theCommission, as close as practical to the day of the completion of the change andno later than three months thereafter, a verified report covering the same elements
as the emissions report referred to in paragraph 1, but limited to the period
corresponding to the activities carried out under its responsibility.’;(6c)in Article 11, the following paragraph is added:‘4.

By 1 October 2023, the Commission shall adopt delegated acts in accordance with
Article 23 to amend the provisions of this Regulation concerning the rules forreporting as laid down in Articles 11, 11a and 12 to take account of the inclusionof methane and nitrous oxide emissions, as well as emissions from offshore ships,
in the scope of this Regulation.’;(7)

the following Article 11a is inserted:‘Article 11a
Reporting and submission of the aggregated emissions data at company level1.

Companies shall determine the aggregated emissions data at company level during areporting period, based on the data of the emissions report and the report referred toin Article 11(2) for each ship that was under their responsibility during the reporting
period, in accordance with the rules laid down in the delegated acts adopted pursuant
to paragraph 4.

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2.

From 2025, the company shall submit to the responsible administering authority by
31 March of each year the aggregated emissions data at company level that covers
the emissions in the reporting period to be reported under Directive 2003/87/EC in
relation to maritime transport activities, in accordance with the rules laid down in thedelegated acts adopted pursuant to paragraph 4 and that is verified in accordancewith Chapter III of this Regulation (the ‘verified aggregated emissions data at
company level’).

3.

The administering authority may require companies to submit the verified aggregatedemissions data at company level by a date earlier than 31 March, but not earlier thanby 28 February.

4.

The Commission is empowered to adopt delegated acts in accordance with Article 23
to supplement this Regulation with the rules for the monitoring and reporting of theaggregated data at company level and the submission of the aggregated emissions
data at company level to the administering authority.’;(8)

Article 12 is amended as follows:(a)the title is replaced by the following:‘Format of the emissions report and reporting of aggregated emissions data at company
level’;(b)paragraph 1 is replaced by the following:‘1.

The emissions report and the reporting of aggregated emissions data at
company level shall be submitted using automated systems and data exchange
formats, including electronic templates.’;

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(9)

Article 13 is amended as follows:(a)paragraph 2 is replaced by the following:‘2.

The verifier shall assess the conformity of the emissions report and the reportreferred to in Article 11(2) with the requirements laid down in Articles 8 to 12
and Annexes I and II.’;(b)

the following paragraphs 5 and 6 are added:‘5.

The verifier shall assess the conformity of the aggregated emissions data at
company level with the requirements laid down in the delegated acts adopted
pursuant to paragraph 6.
Where the verifier concludes, with reasonable assurance, that the aggregatedemissions data at company level are free from material misstatements, theverifier shall issue a verification report stating that the aggregated emissions
data at company level have been verified as satisfactory in accordance with therules laid down in the delegated acts adopted pursuant to paragraph 6.

6.

The Commission is empowered to adopt delegated acts in accordance with
Article 23 to supplement this Regulation with the rules for the verification of
the aggregated emissions data at company level and the issuance of averification report.’;(10)

Article 14 is amended as follows:(a)in paragraph 2, point (d) is replaced by the following:‘(d) the calculations leading to the determination of the overall greenhouse gas
emissions and of the total aggregated ▌emissions of greenhouse gases covered
by Directive 2003/87/EC in relation to maritime transport activities inaccordance with Annex I to that Directive to be reported under that Directive▌in relation to maritime transport activities;’;

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(b)

the following paragraph 4 is added:‘4.

When considering the verification of the aggregated emissions data at company
level, the verifier shall assess the completeness and the consistency of thereported data with the information provided by the company, including its
verified emissions reports and reports referred to in Article 11(2).’;(11)

in Article 15, the following paragraph 6 is added:‘6.

In respect of the verification of aggregated emissions data at company level, theverifier and the company shall comply with the verification rules laid down in thedelegated acts adopted pursuant to the second subparagraph. The verifier shall not
verify the emissions report and the report referred to in Article 11(2) of each ship
under the responsibility of the company.
The Commission is empowered to adopt delegated acts in accordance with Article 23
to supplement this Regulation with the rules for the verification of aggregatedemissions data at company level, including the verification methods and verification
procedure.’;(12)

in Article 16, paragraph 1 is replaced by the following:‘1.

Verifiers that assess the monitoring plans, the emissions reports and the aggregatedemissions data at company level, and issue verification reports and documents ofcompliance referred to in this Regulation shall be accredited for activities under thescope of this Regulation by a national accreditation body pursuant to Regulation(EC) No 765/2008.’;6210/23
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(13)

in Article 20, paragraph 3 is replaced by the following:‘3.

In the case of ships that have failed to comply with the monitoring and reporting
requirements for two or more consecutive reporting periods and where otherenforcement measures have failed to ensure compliance, the competent authority of
the Member State of the port of entry may, after giving the opportunity to thecompany concerned to submit its observations, issue an expulsion order which shallbe notified to the Commission, EMSA, the other Member States and the flag State
concerned. As a result of the issuing of such an expulsion order, every Member State,with the exception of the Member State whose flag the ship is flying, shall refuse
entry of the ship concerned into any of its ports until the company fulfils its
monitoring and reporting obligations in accordance with Articles 11 and 18. Where
the ship flies the flag of a Member State and enters or is found in one of its ports,
the Member State concerned shall, after giving the opportunity to the company
concerned to submit its observations, detain the ship ▌until the company fulfils its
obligations.
Where a ship that flies the flag of a Member State is found to have failed to comply
with the monitoring and reporting requirements referred to in the firstsubparagraph while in one of the ports of the Member State whose flag the ship isflying, the Member State concerned may, after giving the opportunity to thecompany concerned to submit its observations, issue a flag detention order until
the shipping company fulfils its obligations. It shall inform the Commission,
EMSA and the other Member States thereof.
The fulfilment of those obligations shall be confirmed by the notification of a valid
document of compliance to the competent national authority which issued theexpulsion order. This paragraph shall be without prejudice to international maritime
rules applicable in the case of ships in distress.”;

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(13a)in Article 20(5), the following subparagraph is added:‘The possibility to derogate under this paragraph shall not apply to a Member State
whose responsible authority is the administering authority of a shipping company.’;(13b)

in Article 21(2), point (a) is replaced by the following:‘(a) the identity of the ship (name, company, IMO identification number and port ofregistry or home port)’;(13c)

in Article 21, paragraph 5 is amended as follows:‘5.

The Commission shall every two years assess the maritime transport sector's
overall impact on the global climate including through non-CO2-related emissions
or effects from other greenhouse gases and of particles with a global warming
potential not covered by this Regulation.’;(13d)

the following Article is inserted:‘Article 22a
Review
The Commission shall, no later than 31 December 2024, review this Regulation, taking
into account in particular further experience gained in its implementation notably inview of including ships below 5000 gross tonnage but not below 400 gross tonnage in thescope of this Regulation with a view to a possible subsequent inclusion thereof in
Directive 2003/87/EC or to proposing other measures to reduce greenhouse gas
emissions from such ships. The review shall, if appropriate, be accompanied by aproposal to amend this Regulation.”

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(14)

Article 23 is amended as follows:‘(a) in paragraph 2, the following subparagraph is added:‘The power to adopt delegated acts referred to in ▌ Articles 6(8), 7(5), 11a(4), 13(6) and15(6) shall be conferred on the Commission for a period of five years from the entry
into force of [revised MRV Regulation]. The Commission shall draw up a report inrespect of the delegation of power not later than nine months before the end of the
five-year period. The delegation of power shall be tacitly extended for periods of an
identical duration, unless the European Parliament or the Council opposes suchextension not later than three months before the end of each period.’;(b)in paragraphs 3 and 5, the words “Articles 5(2), 15(5), 16(3)” are replaced by thewords “Articles 5(2), 6(8), 7(5), 11a(4), 13(6) 15(5), 15(6) and 16(3)”;(c)

paragraph 5 the following subparagraph is added:‘However, the last sentence of the first subparagraph shall not apply to delegatedacts adopted by 1 October 2023 pursuant to Article 5(2), second subparagraph,
Article 6(8), second subparagraph, Article 11(4) and Article 15(5).’;

Article 2
Entry into force and application
1.

This Regulation shall enter into force on the twentieth day following that of its publicationin the Official Journal of the European Union.

2.

It shall apply from ... [the date of entry into force]. However, Article 1 (1), point (b), shallapply from 1 January 2024.

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This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at ▌..., ...

For the European Parliament

For the Council

The President

The President_________________

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ANNEX III
2021/0202(COD) - MSR

DECISION (EU) 2023/...
OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of ...

amending Decision (EU) 2015/1814 as regards the amount of allowances to be placed in themarket stability reserve for the Union greenhouse gas emission trading scheme until 2030

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article
192(1) thereof,
Having regard to the proposal from the European Commission,
After transmission of the draft legislative act to the national parliaments,
Having regard to the opinion of the European Economic and Social Committee44,
Having regard to the opinion of the Committee of the Regions45,
Acting in accordance with the ordinary legislative procedure,

44456210/23ANNEX

OJ C , , p. .
OJ C , , p. .
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Whereas:(1)

The Paris Agreement, adopted in December 2015 under the United Nations Framework
Convention on Climate Change (UNFCCC) entered into force in November 2016 (“theParis Agreement”)46. Its Parties ▌have agreed to hold the increase in the global averagetemperature well below 2 °C above pre-industrial levels and to pursue efforts to limit thetemperature increase to 1,5 °C above pre-industrial levels. This has been reinforced withthe adoption of the Glasgow Climate Pact in November 2021, in which the Conferenceof the Parties recognises that the impacts of climate change will be much lower at thetemperature increase of 1,5 ºC, compared with 2 ºC, and resolve to pursue efforts to limit
the temperature increase to 1,5 ºC.

(1a)

The urgency of the need to keep the Paris Agreement goal of 1,5 °C alive has become
more significant following the findings of the IPCC Sixth Assessment Report, that global
warming can only be limited to 1.5 °C, if strong and sustained reductions in global
greenhouse gas (GHG) emissions within this decade are immediately undertaken.

(2)

Tackling climate and environmental-related challenges and reaching the objectives of theParis Agreement are at the core of the Communication on “The European Green Deal”,
adopted by the Commission on 11 December 201947.

46
47

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Paris Agreement (OJ L 282, 19.10.2016, p. 4).
COM(2019)640 final.
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(3)

The European Green Deal combines a comprehensive set of mutually reinforcing measuresand initiatives aimed at achieving climate neutrality in the EU by 2050, and sets out a new
growth strategy that aims to transform the Union into a fair and prosperous society, with amodern, resource-efficient and competitive economy, where economic growth isdecoupled from resource use. It also aims to protect, conserve and enhance the Union's
natural capital, and protect the health and well-being of citizens from environment-relatedrisks and impacts. At the same time, that transition has gender equality aspects as well as
a particular impact on some disadvantaged and vulnerable groups, such as older people,
persons with disabilities, persons with a minority racial or ethnic background and low andlower-middle income individuals and households. It also imposes greater challenges oncertain regions, in particular structurally disadvantaged and peripheral regions, as well
as islands. It must therefore be ensured that the transition is just and inclusive, leaving no
one behind.

(4)

The necessity and value of delivering on the European Green Deal have only grown inlight of the very severe effects of the COVID-19 pandemic on the health, living andworking conditions and well-being of the Union’s citizens, which have shown that oursociety and our economy need to improve their resilience to external shocks and act early
to prevent or mitigate them in a manner that is just and results in no one being left
behind, including those at risk of energy poverty. European citizens continue to express
strong views that this applies in particular to climate change48.

(5)

The Union committed to reduce the Union’s economy-wide net greenhouse gas emissions
by at least 55 % by 2030 below 1990 levels in the updated nationally determined
contribution submitted to the UNFCCC Secretariat on 17 December 202049.

48
49

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Special Eurobarometer 513 on Climate Change, 2021,
https://ec.europa.eu/clima/citizens/support_en.
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/European %20Union%20First/EU_NDC_Submission_December %202020.pdf
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(6)

In Regulation (EU) 2021/1119 ▌ the Union has enshrined in legislation the target of
economy-wide climate neutrality by 2050, at the latest, and the aim to achieve negativeemissions thereafter. That Regulation also establishes a binding Union domestic reduction
commitment of net greenhouse gas emissions (emissions after deduction of removals) of atleast 55 % below 1990 levels by 2030. That Regulation also establishes that theCommission should endeavour to align all future legislative and budgetary proposals
with the objectives and targets set out in that Regulation and, in any case of nonalignment, provide the reasons as part of the impact assessment accompanying those
proposals.

(7)

All sectors of the economy need to contribute to achieving those emission reductions.
Therefore, the ambition of the EU Emissions Trading System (EU ETS), established by
Directive 2003/87/EC of the European Parliament and of the Council50, should be adjusted
to be in line with the economy-wide net greenhouse gas emissions reduction commitment
for 2030, and be in line with the objective of achieving climate neutrality by 2050 at thelatest, and the aim to achieve negative emissions thereafter, as laid down in Article 2(1)of Regulation (EU) 2021/1119.

50

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Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003
establishing a system for greenhouse gas emission allowance trading within the Union andamending Council Directive 96/61/EC (OJ L 275, 25.10.2003, p. 32).
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(8)

In order to address the structural imbalance between supply and demand of allowances in
the market, Decision (EU) 2015/1814 of the European Parliament and of the Council51
established a market stability reserve (the ‘reserve’) in 2018, which has been operational
since 2019. Without prejudice to further revisions of the reserve as part of the generalrevision of Directive 2003/87/EC and Decision (EU) 2015/1814 taking place in 2022, theCommission should continuously monitor the functioning of the reserve and ensure thatthe reserve is kept fit for purpose in case of future unforeseeable external shocks. A
robust and forward-looking reserve is essential to ensure the integrity of and effectively
steer the EU ETS in order for it to contribute, as a policy tool, to achieving the Union’s
climate-neutrality objective by 2050, at the latest, and the aim to achieve negativeemissions thereafter as laid down in Article 2(1) of Regulation (EU) 2021/1119.

(9)

The reserve functions by triggering adjustments to the annual volumes of allowances to be
auctioned. In order to preserve a maximum degree of predictability, Decision (EU)2015/1814 established clear rules for placing and releasing allowances in the reserve.

(10)

Where the number of allowances in circulation is above the established upper threshold, anamount of allowances corresponding to a given percentage of these allowances is deductedfrom the volumes of allowances to be auctioned and placed in the reserve. Meanwhile, acorresponding number of allowances is released from the reserve to Member States, andadded to the volumes of the allowances to be auctioned, if the total number of allowancesin circulation falls below the established lower threshold.

51

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Decision (EU) 2015/1814 of the European Parliament and of the Council of 6 October
2015 concerning the establishment and operation of a market stability reserve for theUnion greenhouse gas emission trading scheme and amending Directive 2003/87/EC (OJ L
264, 9.10.2015, p. 1).
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(11)

Directive (EU) 2018/410 of the European Parliament and of the Council52 amended
Decision (EU) 2015/1814 by doubling the percentage rate to be used for determining thenumber of allowances to be placed each year in the reserve from 12 % to 24 % until
31 December 2023 to deliver a credible investment signal to reduce CO2 emissions in a
cost-efficient manner. That decision was taken in the context of the former Union 2030
climate target of reducing economy-wide greenhouse gas emissions by at least 40 %compared to 1990 levels.

(12)

In accordance with Decision (EU) 2015/1814, within three years of the start of theoperation of the reserve, the Commission is to carry out its first review on the basis of ananalysis of the orderly functioning of the European carbon market and, where appropriate,
submit a proposal to the European Parliament and to the Council.

(13)

The review paid particular attention to the percentage figure for the determination of thenumber of allowances to be placed in the reserve, as well as to the numerical value of thethreshold for the total number of allowances in circulation and the number of allowances tobe released from the reserve.

(14)

The analysis carried out in the context of the reserve’s review and the expecteddevelopments relevant to the carbon market demonstrate that a rate of 12 % of the total
number of allowances in circulation to be placed in the reserve each year after 2023 isinsufficient to prevent a significant increase of the surplus of allowances in the EU ETS.
Maintaining the rate of 24 % in this Decision should be without prejudice to further
revisions of the reserve, including, if appropriate, revision of the rate of allowances to beplaced in the reserve, as part of the general revision of Directive 2003/87/EC and
Decision (EU) 2015/1814 taking place in 2022.

52

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Directive (EU) 2018/410 of the European Parliament and of the Council of 14 March 2018
amending Directive 2003/87/EC to enhance cost-effective emission reductions and lowcarbon investments, and Decision (EU) 2015/1814 (OJ L 76, 19.3.2018, p. 3).
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(15b)

Since the objective of this Decision, namely the continuation of the current parametersof the market stability reserve as established pursuant to Directive (EU) 2018/410,
cannot be sufficiently achieved by the Member States but can rather, by reason of its
scale and effects, be better achieved at Union level, the Union may adopt measures, inaccordance with the principle of subsidiarity as set out in Article 5 of the Treaty on
European Union. In accordance with the principle of proportionality as set out in that
Article, this Decision does not go beyond what is necessary in order to achieve that
objective.

(16)

Decision (EU) 2015/1814 should therefore be amended accordingly,

HAVE ADOPTED THIS DECISION:

Article 1
Amendments to Decision (EU) 2015/1814
In Article 1(5), first subparagraph, of Decision (EU) 2015/1814, the last sentence is replaced by thefollowing:‘By way of derogation from the first and second sentences, until 31 December 2030, thepercentages and the 100 million allowances referred to in those sentences shall be doubled.’

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Article 2
Entry into force
This Decision shall enter into force on the twentieth day following that of its publication in the
Official Journal of the European Union.
Done at ..., ...

For the European Parliament

For the Council

The President

The President_________________

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