Article 11b Project activities
1. Member States shall take all necessary measures to ensure that baselines for project activities, as defined by subsequent decisions adopted under the UNFCCC or the Kyoto Protocol, undertaken in countries having signed a Treaty of Accession with the Union fully comply with the acquis communautaire , including the temporary derogations set out in that Treaty of Accession. The Community and its Member States shall only authorise project activities where all project participants have headquarters either in a country that has concluded the international agreement relating to such projects or in a country or sub-federal or regional entity which is linked to the Community scheme pursuant to Article 25. 2. Except as provided for in paragraphs 3 and 4, Member States hosting project activities shall ensure that no ERUs or CERs are issued for reductions or limitations of greenhouse gas emissions from activities falling within the scope of this Directive. 3. Until 31 December 2012, for JI and CDM project activities which reduce or limit directly the emissions of an installation falling within the scope of this Directive, ERUs and CERs may be issued only if an equal number of allowances is cancelled by the operator of that installation. 4. Until 31 December 2012, for JI and CDM project activities which reduce or limit indirectly the emission level of installations falling within the scope of this Directive, ERUs and CERs may be issued only if an equal number of allowances is cancelled from the national registry of the Member State of the ERUs’ or CERs’ origin. 5. A Member State that authorises private or public entities to participate in project activities shall remain responsible for the fulfilment of its obligations under the UNFCCC and the Kyoto Protocol and shall ensure that such participation is consistent with the relevant guidelines, modalities and procedures adopted pursuant to the UNFCCC or the Kyoto Protocol. 6. In the case of hydroelectric power production project activities with a generating capacity exceeding 20 MW, Member States shall, when approving such project activities, ensure that relevant international criteria and guidelines, including those contained in the World Commission on Dams November 2000 Report ‘Dams and Development — A New Framework for Decision-Making’, will be respected during the development of such project activities. 7. Provisions for the implementation of paragraphs 3 and 4, particularly in respect of the avoidance of double counting, shall be adopted by the Commission in accordance with the regulatory procedure referred to in Article 23(2). The Commission shall adopt provisions for the implementation of paragraph 5 of this Article where the host party meets all eligibility requirements for JI project activities. Those measures, designed to amend non-essential elements of this Directive, by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 23(3).
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 11b Project activities):
1. Member States shall take all necessary measures to ensure that baselines for project activities, as defined by subsequent decisions adopted under the UNFCCC or the Kyoto Protocol, undertaken in countries having signed a Treaty of Accession with the Union fully comply with the acquis communautaire , including the temporary derogations set out in that Treaty of Accession. The Union and its Member States shall only authorise project activities where all project participants have headquarters either in a country that has concluded the international agreement relating to such projects or in a country or sub-federal or regional entity which is linked to the EU ETS pursuant to Article 25. 2. Except as provided for in paragraphs 3 and 4, Member States hosting project activities shall ensure that no ERUs or CERs are issued for reductions or limitations of greenhouse gas emissions from activities falling within the scope of this Directive. 3. Until 31 December 2012, for JI and CDM project activities which reduce or limit directly the emissions of an installation falling within the scope of this Directive, ERUs and CERs may be issued only if an equal number of allowances is cancelled by the operator of that installation. 4. Until 31 December 2012, for JI and CDM project activities which reduce or limit indirectly the emission level of installations falling within the scope of this Directive, ERUs and CERs may be issued only if an equal number of allowances is cancelled from the national registry of the Member State of the ERUs’ or CERs’ origin. 5. A Member State that authorises private or public entities to participate in project activities shall remain responsible for the fulfilment of its obligations under the UNFCCC and the Kyoto Protocol and shall ensure that such participation is consistent with the relevant guidelines, modalities and procedures adopted pursuant to the UNFCCC or the Kyoto Protocol. 6. In the case of hydroelectric power production project activities with a generating capacity exceeding 20 MW, Member States shall, when approving such project activities, ensure that relevant international criteria and guidelines, including those contained in the World Commission on Dams November 2000 Report ‘Dams and Development — A New Framework for Decision-Making’, will be respected during the development of such project activities.
Article 12 Transfer, surrender and cancellation of allowances
1. Member States shall ensure that allowances can be transferred between: (a) persons within the Community; (b) persons within the Community and persons in third countries, where such allowances are recognised in accordance with the procedure referred to in Article 25 without restrictions other than those contained in, or adopted pursuant to, this Directive. 1a. The Commission shall, by 31 December 2010, examine whether the market for emissions allowances is sufficiently protected from insider dealing or market manipulation and, if appropriate, shall bring forward proposals to ensure such protection. The relevant provisions of Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) ( 13 ) may be used with any appropriate adjustments needed to apply them to trade in commodities. 2. Member States shall ensure that allowances issued by a competent authority of another Member State are recognised for the purpose of meeting an aircraft operator’s obligations under paragraph 2a or of meeting an operator's obligations under paragraph 3. 2a. Administering Member States shall ensure that, by 30 April each year, each aircraft operator surrenders a number of allowances equal to the total emissions during the preceding calendar year from aviation activities listed in Annex I for which it is the aircraft operator, as verified in accordance with Article 15. Member States shall ensure that allowances surrendered in accordance with this paragraph are subsequently cancelled. 3. Member States shall ensure that, by 30 April each year, the operator of each installation surrenders a number of allowances, other than allowances issued under Chapter II, equal to the total emissions from that installation during the preceding calendar year as verified in accordance with Article 15, and that these are subsequently cancelled. 3a. An obligation to surrender allowances shall not arise in respect of emissions verified as captured and transported for permanent storage to a facility for which a permit is in force in accordance with Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide ( 14 ). 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. 5. Paragraphs 1 and 2 apply without prejudice to Article 10c.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Greenhouse gas emissions from aviation activities are increasing significantly. In the absence of further measures, carbon dioxide (CO 2 ) emissions from international aviation are estimated to almost quadruple by 2050 compared to 2010. Several studies demonstrate that technical and operational measures alone, including CO 2 standards for aircrafts or the deployment of sustainable biofuels, are insufficient to curb aviation emissions, thus the need to use market-based measures to address their growth. The strong growth in GHG emissions from the aviation sector risks undermining the EU's and global efforts to effectively tackle climate change. Back in 2008, the EU led the way in addressing GHG emissions from aviation by including flights between aerodromes within the European Economic Area (hereafter "intra-EEA flights") and flights between aerodromes in the European Economic Area (EEA) and aerodromes in third countries ("extra-EEA flights") in the EU Emissions Trading System. This was instrumental in getting agreement in International Civil Aviation Organisation for a process towards a global market based measure to address international aviation, which started in 2013. It also allowed for aviation to contribute to the EU climate objective of emission reduction of 20% by 2020 compared to 1990 levels. Pending agreement in ICAO, and to promote the development of a global measure to regulate international aviation emissions in ICAO, the EU temporarily reduced the scope of the EU ETS to intra-EEA flights until 2016, waiting for the outcome of ICAO to review its scope in relation to extra-EEA flights. In the absence of any amendments to the EU ETS Directive, the EU ETS will automatically revert back to its full-scope application from 2017. The European Council agreed in October 2014 the 2030 policy framework for climate and energy. A centrepiece of the 2030 framework is the binding target to reduce overall EU greenhouse gas emissions by at least 40% domestically below 1990 levels by 2030. To achieve this target cost-effectively, the sectors covered by the EU emissions trading system (EU ETS) will have to reduce their emissions by 43% compared to 2005, while non-ETS sectors will have to reduce their emissions by 30% compared to 2005. This allowed the EU to submit its contribution under the Paris Agreement, qualifying as an economy wide commitment, including aviation emissions. The EU is committed to duly contribute to the climate goal under the Paris Agreement of keeping global warming well below 2 degrees Celsius above pre-industrial levels and pursue efforts to limit temperature increase to 1.5 degrees Celsius, as well as the aspirational goal set by the International Civil Aviation Organisation that global net CO 2 emissions from international aviation should not exceed 2020 levels ('carbon neutral growth' or CNG 2020). In October 2016, ICAO agreed at its 39 th Assembly on a Resolution for a global market-based measure (GMBM) to address the growth in international aviation emissions globally from 2021 through an offsetting system, aimed at enabling the aspiration goal of stabilising international aviation emissions at 2020 levels. During the GMBM's first phase (2021-2026), participation in the GMBM is explicitly voluntary. All major aviation countries should apply the GMBM from the start of its second phase in 2027. The EU and its Member States expressed their intention to apply the GMBM during its voluntary phase. While the aspirational goal and the basic nature of the GMBM as offsetting are agreed, a number of important features of the GMBM, key for its effectiveness and environmental integrity from a climate perspective, still need to be developed and agreed in ICAO before the GMBM can be implemented in 2021. Any delays in agreeing on these elements risk delaying the operationalization of the GMBM. This would also risk delaying implementation by States in domestic legislation which is crucial since the concrete operationalization of the GMBM rests on such national and regional action. The existing legislation requires the Commission to assess the outcome of the 39 th ICAO Assembly and, in that light, to review the scope of the EU ETS for flights to and from the EEA. In the absence of amendment to the existing legislation, the initial scope of the ETS (ie including extra EEA flights) would apply again. In view of the agreement on the GMBM at ICAO, the EU support towards its completion and timely operationalization, and the EU's intended implementation of the GMBM from 2021 onwards, it is deemed necessary to review the EU ETS legislation. To provide further momentum to international discussions on the remaining rules and governance necessary for the implementation of the GMBM it is proposed to continue the reduced scope application of the EU ETS (i.e. to flights between aerodromes located within the EEA, as set out in Regulation No 421/2014) beyond 2016. Once there is more clarity about the nature and content of the legal instruments adopted by ICAO for the implementation of the GMBM as well as about the intentions of our international partners regarding the implementation of the GMBM, a further assessment and review the EU ETS for the post-2020 period will be carried out. This will also take due account of the necessary consistency with the economy wide commitment taken by the EU under the Paris Agreement and its agreed objective of reducing GHG emissions domestically by 40 % by 2030 compared to 1990 levels. To provide legal certainty for compliance with the ETS in 2017, it is important that this proposal is agreed between the European Parliament and Council swiftly and ideally by the end of 2017.
Revised version (Article 12 Transfer, surrender and cancellation of allowances):
1. Member States shall ensure that allowances can be transferred between: (a) persons within the Community; (b) persons within the Community and persons in third countries, where such allowances are recognised in accordance with the procedure referred to in Article 25 without restrictions other than those contained in, or adopted pursuant to, this Directive. 1a. The Commission shall, by 31 December 2010, examine whether the market for emissions allowances is sufficiently protected from insider dealing or market manipulation and, if appropriate, shall bring forward proposals to ensure such protection. The relevant provisions of Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) ( 2 ) may be used with any appropriate adjustments needed to apply them to trade in commodities. 2. Member States shall ensure that allowances issued by a competent authority of another Member State are recognised for the purpose of meeting an aircraft operator’s obligations under paragraph 2a or of meeting an operator's obligations under paragraph 3. 2a. Administering Member States shall ensure that, by 30 April each year, each aircraft operator surrenders a number of allowances equal to the total emissions during the preceding calendar year from aviation activities listed in Annex I for which it is the aircraft operator, as verified in accordance with Article 15. Member States shall ensure that allowances surrendered in accordance with this paragraph are subsequently cancelled. 3. For the period until 31 December 2020, Member States shall ensure that, by 30 April each year, the operator of each installation surrenders a number of allowances, other than allowances issued under Chapter II, that is equal to the total emissions from that installation during the preceding calendar year as verified in accordance with Article 15, and that those allowances are subsequently cancelled. For the period starting from 1 January 2021, Member States shall ensure that, by 30 April each year, the operator of each installation surrenders a number of allowances, that is equal to the total emissions from that installation during the preceding calendar year as verified in accordance with Article 15, and that those allowances are subsequently cancelled, subject to the review referred to in Article 28b. 3-a. Where necessary, and for as long as is necessary, in order to protect the environmental integrity of the EU ETS, aircraft operators and other operators in the EU ETS shall be prohibited from using allowances that are issued by a Member State in respect of which there are obligations lapsing for aircraft operators and other operators. The legal act referred to in Article 19 shall include the measures necessary in the cases referred to in this paragraph. 3a. An obligation to surrender allowances shall not arise in respect of emissions verified as captured and transported for permanent storage to a facility for which a permit is in force in accordance with Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide ( 3 ). 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. 5. Paragraphs 1 and 2 apply without prejudice to Article 10c.
Article 13 Validity of allowances
1. Allowances issued from 1 January 2013 onwards shall be valid for emissions during periods of eight years beginning on 1 January 2013. 2. Four months after the beginning of each period referred to in paragraph 1, allowances which are no longer valid and have not been surrendered and cancelled in accordance with Article 12 shall be cancelled by the competent authority. Member States shall issue allowances to persons for the current period to replace any allowances held by them which are cancelled in accordance with the first subparagraph.
Amendment rationale: CONTEXT OF THE PROPOSAL Emissions from aviation are one of the fastest growing sources of greenhouse gas emissions. As the technological potential for emissions reduction is limited in the aviation sector, market-based measures (MBMs) allow aviation to contribute to emission reductions by the airlines offsetting their strong emission growth through funding emission reductions in other sectors. The suitability of MBMs for international aviation has long been recognised. The 2001 ICAO Assembly endorsed the application of open emissions trading systems to international aviation. Following the ICAO's 2004 endorsement of regional MBMs, the EU led the way by including aviation in its Emission Trading System (EU ETS). Despite its positive environmental effects at low economic costs, the implementation of the EU ETS has had to face significant international opposition (e.g. allegations that regulating emissions from airlines based outside the EU would violate the sovereignty of third states). The European Court of Justice has, however, dismissed appeals by foreign airlines in this respect and confirmed the legality of the EU ETS[1]. At the same time, the integration of aviation into the EU ETS has been decisive in driving forward ICAO discussions. The intensive engagement of the EU in tackling climate change has been crucial in generating momentum in ICAO towards global action for addressing aviation emissions. Clearly, given the EU ETS would only ever cover a proportion of international aviation emissions, the overall strong global growth of these emissions will continue if no MBM is implemented on a global level, and emission reduction goals will remain aspirational. The 2013 38th ICAO Assembly has now decided on the development of a global MBM to be finalised at the next ICAO Assembly in 2016 and to be implemented by 2020. Progress was not made on a "framework" for national/ regional MBMs up to 2020, as in particular the Assembly resolution repeated the same language as from the 2007 and 2010 Assemblies and the European States confirmed their position on the 2007 and 2010 Assembly resolutions as concerns so-called 'mutual agreement'. In response to this progress on a global MBM and to promote further momentum, the Commission considers it appropriate to propose lowering the proportion of emissions to which the EU emissions trading system should apply up to 2020, as the further action already envisaged in Decision No. 377/2013/EU.
Revised version (Article 13 Validity of allowances):
1. Allowances issued from 1 January 2013 onwards shall be valid for emissions during periods of eight years beginning on 1 January 2013. 2. Four months after the beginning of each period referred to in paragraph 1, allowances which are no longer valid and have not been surrendered and cancelled in accordance with Article 12 shall be cancelled by the competent authority. Member States shall issue allowances to persons for the current period to replace any allowances held by them which are cancelled in accordance with the first subparagraph. Similarly, allowances held in the market stability reserve and which are no longer valid shall be replaced by allowances which are valid for the current period.
Article 14 Monitoring and reporting of emissions
1. By 31 December 2011, the Commission shall adopt a regulation for the monitoring and reporting of emissions and, where relevant, activity data, from the activities listed in Annex I, for the monitoring and reporting of tonne-kilometre data for the purpose of an application under Articles 3e or 3f, which shall be based on the principles for monitoring and reporting set out in Annex IV and shall specify the global warming potential of each greenhouse gas in the requirements for monitoring and reporting emissions for that gas. That measure, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 23(3). 2. The regulation referred to in paragraph 1 shall take into account the most accurate and up-to-date scientific evidence available, in particular from the IPCC, and may also specify requirements for operators to report on emissions associated with the production of goods produced by energy intensive industries which may be subject to international competition. That regulation may also specify requirements for this information to be verified independently. Those requirements may include reporting on levels of emissions from electricity generation covered by the Community scheme associated with the production of such goods. 3. Member States shall ensure that each operator of an installation or an aircraft operator monitors and reports the emissions from that installation during each calendar year, or, from 1 January 2010, the aircraft which it operates, to the competent authority after the end of that year in accordance with the regulation referred to in paragraph 1. 4. The regulation referred to in paragraph 1 may include requirements on the use of automated systems and data exchange formats to harmonise communication on the monitoring plan, the annual emission report and the verification activities between the operator, the verifier and competent authorities.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 14 Monitoring and reporting of emissions):
1. The Commission shall adopt implementing acts concerning the detailed arrangements for the monitoring and reporting of emissions and, where relevant, activity data, from the activities listed in Annex I to this Directive, and non-CO 2 aviation effects on routes for which emissions are reported under this Directive, which shall be based on the principles for monitoring and reporting set out in Annex IV to this Directive and the requirements set out in paragraphs 2 and 5 of this Article. Those implementing acts shall also specify the global warming potential of each greenhouse gas and take into account up-to-date scientific knowledge on the effects of non-CO 2 aviation emissions in the requirements for monitoring and reporting of emissions and their effects, including non-CO 2 aviation effects. Those implementing acts shall provide for the application of the sustainability and greenhouse gas emission-saving criteria for the use of biomass established by Directive (EU) 2018/2001, with any necessary adjustments for application under this Directive, in order for such 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 fuels of non-biological origin and recycled carbon fuels, ensuring that such emissions are accounted for and that double counting is avoided. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 22a(2). 2. The acts referred to in paragraph 1 shall take into account the most accurate and up-to-date scientific evidence available, in particular from the IPCC, and may also specify requirements for operators to report on emissions associated with the production of goods produced by energy intensive industries which may be subject to international competition. These acts may also specify requirements for this information to be verified independently. Those requirements may include reporting on levels of emissions from electricity generation covered by the EU ETS associated with the production of such goods. 3. Member States shall ensure that each operator of an installation or an aircraft operator monitors and reports the emissions from that installation during each calendar year, or, from 1 January 2010, the aircraft which it operates, to the competent authority after the end of that year in accordance with the acts referred to in paragraph 1. 4. The acts referred to in paragraph 1 may include requirements on the use of automated systems and data exchange formats to harmonise communication on the monitoring plan, the annual emission report and the verification activities between the operator, the verifier and competent authorities. 5. Aircraft operators shall report once a year on the non-CO 2 aviation effects occurring from 1 January 2025. For that purpose, the Commission shall adopt by 31 August 2024 an implementing act pursuant to paragraph 1 in order to include non-CO 2 aviation effects in a monitoring, reporting and verification framework. That monitoring, reporting and verification framework shall contain, at a minimum, the three-dimensional aircraft trajectory data available, and ambient humidity and temperature to enable a CO 2 equivalent per flight to be produced. The Commission shall ensure, subject to available resources, that tools are available to facilitate and, to the extent possible, automatise monitoring, reporting and verification in order to minimise any administrative burden. From 1 January 2025, Member States shall ensure that each aircraft operator monitors and reports the non-CO 2 effects from each aircraft that it operates during each calendar year to the competent authority after the end of each year in accordance with the implementing acts referred to in paragraph 1. The Commission shall submit annually from 2026, as part of the report referred to in Article 10(5), a report on the results from the application of the monitoring, reporting and verification framework referred to in the first subparagraph of this paragraph. By 31 December 2027, based on the results from the application of the monitoring, reporting and verification framework for non-CO 2 aviation effects, the Commission shall submit a report and, where appropriate and after having first carried out an impact assessment, a legislative proposal to mitigate non-CO 2 aviation effects by expanding the scope of the EU ETS to include non-CO 2 aviation effects.
Article 15 Verification and accreditation
Member States shall ensure that the reports submitted by operators and aircraft operators pursuant to Article 14(3) are verified in accordance with the criteria set out in Annex V and any detailed provisions adopted by the Commission in accordance with this Article, and that the competent authority is informed thereof. Member States shall ensure that an operator or aircraft operator whose report has not been verified as satisfactory in accordance with the criteria set out in Annex V and any detailed provisions adopted by the Commission in accordance with this Article by 31 March each year for emissions during the preceding year cannot make further transfers of allowances until a report from that operator or aircraft operator has been verified as satisfactory. The Commission may adopt detailed provisions for the verification of reports submitted by aircraft operators pursuant to Article 14(3) and applications under Articles 3e and 3f, including the verification procedures to be used by verifiers, in accordance with the regulatory procedure referred to in Article 23(2). By 31 December 2011, the Commission shall adopt a regulation for the verification of emission reports based on the principles set out in Annex V and for the accreditation and supervision of verifiers. It shall specify conditions for the accreditation and withdrawal of accreditation, for mutual recognition and peer evaluation of accreditation bodies, as appropriate. That measure, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 23(3).
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 15 Verification and accreditation):
Member States shall ensure that the reports submitted by operators and aircraft operators pursuant to Article 14(3) are verified in accordance with the criteria set out in Annex V and any detailed provisions adopted by the Commission in accordance with this Article, and that the competent authority is informed thereof. Member States shall ensure that an operator or aircraft operator whose report has not been verified as satisfactory in accordance with the criteria set out in Annex V and any detailed provisions adopted by the Commission in accordance with this Article by 31 March each year for emissions during the preceding year cannot make further transfers of allowances until a report from that operator or aircraft operator has been verified as satisfactory. The Commission shall adopt implementing acts concerning the verification of emission reports based on the principles set out in Annex V and for the accreditation and supervision of verifiers. The Commission may also adopt implementing acts for the verification of reports submitted by aircraft operators pursuant to Article 14(3) and applications under Articles 3e and 3f, including the verification procedures to be used by verifiers. It shall specify conditions for the accreditation and withdrawal of accreditation, for mutual recognition and peer evaluation of accreditation bodies, as appropriate. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 22a(2).
Article 15a Disclosure of information and professional secrecy
Member States and the Commission shall ensure that all decisions and reports relating to the quantity and allocation of allowances and to the monitoring, reporting and verification of emissions are immediately disclosed in an orderly manner ensuring non-discriminatory access. Information covered by professional secrecy may not be disclosed to any other person or authority except by virtue of the applicable laws, regulations or administrative provisions.
Article 16 Penalties
1. Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that such rules are implemented. The penalties provided for must be effective, proportionate and dissuasive. Member States shall notify these provisions to the Commission 31 December 2003 and shall notify it without delay of any subsequent amendment affecting them. 2. Member States shall ensure publication of the names of operators and aircraft operators who are in breach of requirements to surrender sufficient allowances under this Directive. 3. Member States shall ensure that any operator or aircraft operator who does not surrender sufficient allowances by 30 April of each year to cover its emissions during the preceding year shall be held liable for the payment of an excess emissions penalty. The excess emissions penalty shall be EUR 100 for each tonne of carbon dioxide equivalent emitted for which the operator or aircraft operator has not surrendered allowances. Payment of the excess emissions penalty shall not release the operator or aircraft operator from the obligation to surrender an amount of allowances equal to those excess emissions when surrendering allowances in relation to the following calendar year. 4. The excess emissions penalty relating to allowances issued from 1 January 2013 onwards shall increase in accordance with the European index of consumer prices. 5. In the event that an aircraft operator fails to comply with the requirements of this Directive and where other enforcement measures have failed to ensure compliance, its administering Member State may request the Commission to decide on the imposition of an operating ban on the aircraft operator concerned. 6. Any request by an administering Member State under paragraph 5 shall include: (a) evidence that the aircraft operator has not complied with its obligations under this Directive; (b) details of the enforcement action which has been taken by that Member State; (c) a justification for the imposition of an operating ban at Community level; and (d) a recommendation for the scope of an operating ban at Community level and any conditions that should be applied. 7. When requests such as those referred to in paragraph 5 are addressed to the Commission, the Commission shall inform the other Member States through their representatives on the Committee referred to in Article 23(1) in accordance with the Committee’s Rules of Procedure. 8. The adoption of a decision following a request pursuant to paragraph 5 shall be preceded, when appropriate and practicable, by consultations with the authorities responsible for regulatory oversight of the aircraft operator concerned. Whenever possible, consultations shall be held jointly by the Commission and the Member States. 9. When the Commission is considering whether to adopt a decision following a request pursuant to paragraph 5, it shall disclose to the aircraft operator concerned the essential facts and considerations which form the basis for such decision. The aircraft operator concerned shall be given an opportunity to submit written comments to the Commission within 10 working days from the date of disclosure. 10. At the request of a Member State, the Commission may, in accordance with the regulatory procedure referred to in Article 23(2), adopt a decision to impose an operating ban on the aircraft operator concerned. 11. Each Member State shall enforce, within its territory, any decisions adopted under paragraph 10. It shall inform the Commission of any measures taken to implement such decisions. 12. Where appropriate, detailed rules shall be established in respect of the procedures referred to in this Article. Those measures, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 23(3).
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 16 Penalties):
1. Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that such rules are implemented. The penalties provided for must be effective, proportionate and dissuasive. Member States shall notify these provisions to the Commission and shall notify it without delay of any subsequent amendment affecting them. 2. Member States shall ensure the publication of the names of operators, aircraft operators and shipping companies that are in breach of requirements to surrender sufficient allowances under this Directive. 3. Member States shall ensure that any operator or aircraft operator who does not surrender sufficient allowances by 30 September of each year to cover its emissions during the preceding year shall be held liable for the payment of an excess emissions penalty. The excess emissions penalty shall be EUR 100 for each tonne of carbon dioxide equivalent emitted for which the operator or aircraft operator has not surrendered allowances. Payment of the excess emissions penalty shall not release the operator or aircraft operator from the obligation to surrender an amount of allowances equal to those excess emissions when surrendering allowances in relation to the following calendar year. 3a. The penalties set out in paragraph 3 shall also apply in respect of shipping companies. 4. The excess emissions penalty relating to allowances issued from 1 January 2013 onwards shall increase in accordance with the European index of consumer prices. 5. In the event that an aircraft operator fails to comply with the requirements of this Directive and where other enforcement measures have failed to ensure compliance, its administering Member State may request the Commission to decide on the imposition of an operating ban on the aircraft operator concerned. 7. When requests such as those referred to in paragraph 5 are addressed to the Commission, the Commission shall inform the other Member States through their representatives on the Committee referred to in Article 23(1) in accordance with the Committee’s Rules of Procedure. 8. The adoption of a decision following a request pursuant to paragraph 5 shall be preceded, when appropriate and practicable, by consultations with the authorities responsible for regulatory oversight of the aircraft operator concerned. Whenever possible, consultations shall be held jointly by the Commission and the Member States. 9. When the Commission is considering whether to adopt a decision following a request pursuant to paragraph 5, it shall disclose to the aircraft operator concerned the essential facts and considerations which form the basis for such decision. The aircraft operator concerned shall be given an opportunity to submit written comments to the Commission within 10 working days from the date of disclosure. 10. At the request of a Member State, the Commission may, in accordance with the examination procedure referred to in Article 22a(2) , adopt a decision to impose an operating ban on the aircraft operator concerned. 11. Each Member State shall enforce, within its territory, any decisions adopted under paragraph 10. It shall inform the Commission of any measures taken to implement such decisions. 11a. In the case of a shipping company that has failed to comply with the surrender obligations for two or more consecutive reporting periods, and where other enforcement measures have failed to ensure compliance, the competent authority of the Member State of the port of entry may, after giving the opportunity to the shipping company concerned to submit its observations, issue an expulsion order, which shall be notified to the Commission, the European Maritime Safety Agency (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 ships under the responsibility of the shipping company concerned into any of its ports until the shipping company fulfils its surrender obligations in accordance with Article 12. 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 shipping company concerned to submit its observations, detain the ship until the shipping company fulfils its surrender obligations. Where a ship of a shipping company as referred to in the first subparagraph is found 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 shipping company concerned to submit its observations, issue a flag State detention order until the shipping company fulfils its surrender obligations. It shall inform the Commission, EMSA and the other Member States thereof. As a result of the issuing of such a flag State detention order, every Member State shall take the same measures as are required to be taken following the issuing of an expulsion order in accordance with the first subparagraph, second sentence. This paragraph shall be without prejudice to international maritime rules applicable in the case of ships in distress. 12. The Commission shall adopt implementing acts concerning detailed rules in respect of the procedures referred to in this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 22a(2).
Article 17 Access to information
Decisions relating to the allocation of allowances, information on project activities in which a Member State participates or authorises private or public entities to participate, and the reports of emissions required under the greenhouse gas emissions permit and held by the competent authority, shall be made available to the public in accordance with Directive 2003/4/EC.
Article 18 Competent authority
Member States shall make the appropriate administrative arrangements, including the designation of the appropriate competent authority or authorities, for the implementation of the rules of this Directive. Where more than one competent authority is designated, the work of these authorities undertaken pursuant to this Directive must be coordinated. Member States shall in particular ensure coordination between their designated focal point for approving project activities pursuant to Article 6 (1)(a) of the Kyoto Protocol and their designated national authority for the implementation of Article 12 of the Kyoto Protocol respectively designated in accordance with subsequent decisions adopted under the UNFCCC or the Kyoto Protocol.
Article 18a Administering Member State
1. The administering Member State in respect of an aircraft operator shall be: (a) in the case of an aircraft operator with a valid operating licence granted by a Member State in accordance with the provisions of Council Regulation (EEC) No 2407/92 of 23 July 1992 on licensing of air carriers ( 15 ), the Member State which granted the operating licence in respect of that aircraft operator; and (b) in all other cases, the Member State with the greatest estimated attributed aviation emissions from flights performed by that aircraft operator in the base year. 2. Where in the first two years of any period referred to in Article 3c, none of the attributed aviation emissions from flights performed by an aircraft operator falling within paragraph 1(b) of this Article are attributed to its administering Member State, the aircraft operator shall be transferred to another administering Member State in respect of the next period. The new administering Member State shall be the Member State with the greatest estimated attributed aviation emissions from flights performed by that aircraft operator during the first two years of the previous period. 3. Based on the best available information, the Commission shall: (a) before 1 February 2009, publish a list of aircraft operators which performed an aviation activity listed in Annex I on or after 1 January 2006 specifying the administering Member State for each aircraft operator in accordance with paragraph 1; and (b) before 1 February of each subsequent year, update the list to include aircraft operators which have subsequently performed an aviation activity listed in Annex I. 4. The Commission may, in accordance with the regulatory procedure referred to in Article 23(2), develop guidelines relating to the administration of aircraft operators under this Directive by administering Member States. 5. For the purposes of paragraph 1, ‘base year’ means, in relation to an aircraft operator which started operating in the Community after 1 January 2006, the first calendar year of operation, and in all other cases, the calendar year starting on 1 January 2006.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 18a Administering Member State):
2. Where in the first two years of any period referred to in Article 13, none of the attributed aviation emissions from flights performed by an aircraft operator falling within point (b) of paragraph 1 of this Article are attributed to its administering Member State, the aircraft operator shall be transferred to another administering Member State in respect of the next period. The new administering Member State shall be the Member State with the greatest estimated attributed aviation emissions from flights performed by that aircraft operator during the first two years of the previous period. 3. Based on the best available information, the Commission shall: (a) before 1 February 2009, publish a list of aircraft operators which performed an aviation activity listed in Annex I on or after 1 January 2006 specifying the administering Member State for each aircraft operator in accordance with paragraph 1; and (b) from 2024, at least every two years, update the list to include aircraft operators which have subsequently performed an aviation activity listed in Annex I; where an aircraft operator has not performed an aviation activity listed in Annex I during the four consecutive calendar years preceding the updating of the list, that aircraft operator shall not be included in the list. 4. The Commission may, in accordance with the examination procedure referred to in Article 22a(2) , develop guidelines relating to the administration of aircraft operators under this Directive by administering Member States. 5. For the purposes of paragraph 1, ‘base year’ means, in relation to an aircraft operator which started operating in the Union after 1 January 2006, the first calendar year of operation, and in all other cases, the calendar year starting on 1 January 2006.
Article 18b Assistance from Eurocontrol
For the purposes of carrying out its obligations under Articles 3c(4) and 18a, the Commission may request the assistance of Eurocontrol or another relevant organisation and may conclude to that effect any appropriate agreements with those organisations.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 18b Assistance from the Commission, EMSA and other relevant organisations):
1. For the purposes of carrying out its obligations under Article 3c(4) and Articles 3g, 3gd, 3ge, 3gf, 3gg and 18a, the Commission, the administering Member State and administering authorities in respect of a shipping company may request the assistance of EMSA or another relevant organisation and may conclude to that effect any appropriate agreements with those organisations. 2. The Commission, assisted by EMSA, shall endeavour to develop appropriate tools and guidance to facilitate and coordinate verification and enforcement activities related to the application of this Directive to maritime transport. As far as practicable, such guidance and tools shall be made available to the Member States and the verifiers for information-sharing purposes and in order to better ensure robust enforcement of the national measures transposing this Directive.
Article 19 Registries
1. Allowances issued from 1 January 2012 onwards shall be held in the Community registry for the execution of processes pertaining to the maintenance of the holding accounts opened in the Member State and the allocation, surrender and cancellation of allowances under the Commission Regulation referred to in paragraph 3. Each Member State shall be able to fulfil the execution of authorised operations under the UNFCCC or the Kyoto Protocol. 2. Any person may hold allowances. The registry shall be accessible to the public and shall contain separate accounts to record the allowances held by each person to whom and from whom allowances are issued or transferred. 3. In order to implement this Directive, the Commission shall adopt a Regulation for a standardised and secured system of registries in the form of standardised electronic databases containing common data elements to track the issue, holding, transfer and cancellation of allowances, to provide for public access and confidentiality as appropriate and to ensure that there are no transfers which are incompatible with the obligations resulting from the Kyoto Protocol. That Regulation shall also include provisions concerning the use and identification of CERs and ERUs in the Community scheme and the monitoring of the level of such use. That measure, designed to amend non-essential elements of this Directive by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 23(3). 4. The Regulation referred to in paragraph 3 shall contain appropriate modalities for the Community registry to undertake transactions and other operations to implement arrangements referred to in Article 25(1b). That Regulation shall also include processes for the change and incident management for the Community registry with regard to issues in paragraph 1 of this Article. It shall contain appropriate modalities for the Community registry to ensure that initiatives of the Member States pertaining to efficiency improvement, administrative cost management and quality control measures are possible.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 19 Registries):
1. Allowances issued from 1 January 2012 onwards shall be held in the Union registry for the execution of processes pertaining to the maintenance of the holding accounts opened in the Member State and the allocation, surrender and cancellation of allowances under the Commission Acts referred to in paragraph 3. Each Member State shall be able to fulfil the execution of authorised operations under the UNFCCC or the Kyoto Protocol. 2. Any person may hold allowances. The registry shall be accessible to the public and shall contain separate accounts to record the allowances held by each person to whom and from whom allowances are issued or transferred. 3. The Commission is empowered to adopt delegated acts in accordance with Article 23 to supplement this Directive by laying down all necessary requirements concerning the Union Registry for the trading period commencing on 1 January 2013 and subsequent periods, in the form of standardised electronic databases containing common data elements to track the issue, holding, transfer and cancellation, as applicable, of allowances, and to provide for public access and confidentiality, as appropriate. Those delegated acts shall also include provisions to put into effect rules on the mutual recognition of allowances in agreements to link emission trading systems. 4. The Acts referred to in paragraph 3 shall contain appropriate modalities for the Union registry to undertake transactions and other operations to implement arrangements referred to in Article 25(1b). These Acts shall also include processes for the change and incident management for the Union registry with regard to issues in paragraph 1 of this Article. It shall contain appropriate modalities for the Union registry to ensure that initiatives of the Member States pertaining to efficiency improvement, administrative cost management and quality control measures are possible.
Article 20 Central Administrator
1. The Commission shall designate a Central Administrator to maintain an independent transaction log recording the issue, transfer and cancellation of allowances. 2. The Central Administrator shall conduct an automated check on each transaction in registries through the independent transaction log to ensure there are no irregularities in the issue, transfer and cancellation of allowances. 3. If irregularities are identified through the automated check, the Central Administrator shall inform the Member State or Member States concerned who shall not register the transactions in question or any further transactions relating to the allowances concerned until the irregularities have been resolved.
Article 21 Reporting by Member States
1. Each year the Member States shall submit to the Commission a report on the application of this Directive. That report shall pay particular attention to the arrangements for the allocation of allowances, the operation of registries, the application of the implementing measures on monitoring and reporting, verification and accreditation and issues relating to compliance with this Directive and on the fiscal treatment of allowances, if any. e first report shall be sent to the Commission by 30 June 2005. The report shall be drawn up on the basis of a questionnaire or outline drafted by the Commission in accordance with the procedure laid down in Article 6 of Directive 91/692/EEC. The questionnaire or outline shall be sent to Member States at least six months before the deadline for the submission of the first report. 2. On the basis of the reports referred to in paragraph 1, the Commission shall publish a report on the application of this Directive within three months of receiving the reports from the Member States. 3. The Commission shall organise an exchange of information between the competent authorities of the Member States concerning developments relating to issues of allocation, the use of ERUs and CERs in the Community scheme, the operation of registries, monitoring, reporting, verification, accreditation, information technology, and compliance with this Directive.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 21 Reporting by Member States):
1. Each year the Member States shall submit to the Commission a report on the application of this Directive. That report shall pay particular attention to the arrangements for the allocation of allowances, the operation of registries, the application of the implementing measures on monitoring and reporting, verification and accreditation and issues relating to compliance with this Directive and on the fiscal treatment of allowances, if any. e first report shall be sent to the Commission by 30 June 2005. The report shall be drawn up on the basis of a questionnaire or outline adopted by the Commission in the form of implementing acts. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 22a(2). e questionnaire or outline shall be sent to Member States at least six months before the deadline for the submission of the first report. 2. On the basis of the reports referred to in paragraph 1, the Commission shall publish a report on the application of this Directive within three months of receiving the reports from the Member States. 3. The Commission shall organise an exchange of information between the competent authorities of the Member States concerning developments relating to issues of allocation, the use of ERUs and CERs in the EU ETS , the operation of registries, monitoring, reporting, verification, accreditation, information technology, and compliance with this Directive. 4. Every three years, the report referred to in paragraph 1 shall also pay particular attention to the equivalent measures adopted for small installations excluded from the EU ETS. The issue of equivalent measures adopted for small installations shall also be considered in the exchange of information referred to in paragraph 3.
Article 21a Support of capacity-building activities
In accordance with the UNFCCC, the Kyoto Protocol and any subsequent decision adopted for their implementation, the Commission and the Member States shall endeavour to support capacity-building activities in developing countries and countries with economies in transition in order to help them take full advantage of JI and the CDM in a manner that supports their sustainable development strategies and to facilitate the engagement of entities in JI and CDM project development and implementation.
Article 22 Amendments to the Annexes
The Annexes to this Directive, with the exception of Annexes I, IIa and IIb, may be amended in the light of the reports provided for in Article 21 and of the experience of the application of this Directive. Annexes IV and V may be amended in order to improve the monitoring, reporting and verification of emissions. Those measures, designed to amend non-essential elements of this Directive, inter alia, by supplementing it, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 23(3).
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.
Revised version (Article 22 Amendments to the Annexes):
The Commission is empowered to adopt delegated acts in accordance with Article 23 to amend, where appropriate, the Annexes to this Directive, with the exception of Annexes I, IIa and IIb, in the light of the reports provided for in Article 21 and of the experience of the application of this Directive. Annexes IV and V may be amended in order to improve the monitoring, reporting and verification of emissions.
Article 23 Committee
1. The Commission shall be assisted by the committee instituted by Article 8 of Decision 93/389/EEC. 2. Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months. 3. Where reference is made to this paragraph, Article 5a(1) to (4) and Article 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. 4. Where reference is made to this paragraph, Article 4 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal The European Green Deal Communication 1 launched a new growth strategy for the EU that aims to transform the EU into a fair and prosperous society with a modern, resource-efficient and competitive economy. It reaffirms the Commission’s ambition to increase its climate targets and make Europe the first climate-neutral continent by 2050. Furthermore, it aims to protect the health and well-being of citizens from environment-related risks and impacts. The necessity and value of the European Green Deal have only grown in light of the very severe effects of the COVID-19 pandemic on the health, living and working conditions and well-being of the Union’s citizens. Tackling climate change is an urgent challenge. In line with the scientific findings of the Intergovernmental Panel on Climate Change (IPCC) Special Report, global net-zero CO 2 emissions need to be achieved around 2050, and neutrality for all other greenhouse gases as soon as possible later in the century. This urgent challenge requires the EU to step up its action and demonstrate global leadership by becoming climate neutral by 2050. This objective is set out in the Communication ‘ A Clean Planet for all ’ - A European strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy’ 2 . Based on the European Green Deal strategy and a comprehensive impact assessment, the Commission’s Communication of September 2020 on Stepping up Europe’s 2030 climate ambition 3 (‘2030 Climate Target Plan’) proposed to raise the EU's ambition and put forward a comprehensive plan to increase the European Union’s binding target for 2030 towards at least 55 % net emission reduction, in a responsible way. Raising the 2030 ambition now helps give certainty to policymakers and investors, so that decisions made in the coming years do not lock in emission levels inconsistent with the EU’s objective to be climate neutral by 2050. The 2030 target is in line with the Paris Agreement objective to keep the global temperature increase to well below 2°C and pursue efforts to keep it to 1.5°C. The European Council endorsed the new EU binding target for 2030 at its meeting of December 2020 4 . It also called on the Commission “ to assess how all economic sectors can best contribute to the 2030 target and to make the necessary proposals, accompanied by an in-depth examination of the environmental, economic and social impact at Member State level, taking into account national energy and climate plans and reviewing existing flexibilities ”. To this end, the European Climate Law 5 , as agreed with the co-legislators, makes the EU’s climate neutrality target legally binding, and raises the 2030 ambition by setting a target of at least 55 % net emission reductions by 2030 compared to 1990. In order to follow the pathway proposed in the European Climate Law, and deliver this increased level of ambition for 2030, the Commission has reviewed the climate and energy legislation currently in place that are expected to only reduce greenhouse gas emissions by 40 % by 2030 and by 60 % by 2050. This ‘ Fit for 55 ’ legislative package, as announced in the 2030 Climate Target Plan, is the most comprehensive building block in the efforts to implement the ambitious new 2030 climate target, and all economic sectors and policies will need to make their contribution. The European Council also invited the Commission in December 2020 to consider exploring ways to strengthen the EU Emissions Trading System (EU ETS), while preserving its integrity and taking into account the need to address distributional concerns and energy poverty. The European Council also invited the Commission to consider proposing measures that enable energy-intensive industries to develop and deploy innovative climate-neutral technologies while maintaining their industrial competitiveness. The current ETS legislation was revised in 2018 to deliver a 43 % reduction in EU ETS emissions by 2030 compared to 2005, coherent with an EU economy-wide emissions reduction target of at least 40 % by 2030 compared to 1990. More recent analysis by the Commission services, however, indicates that, if the legislation remains unchanged, the sectors currently covered by the EU ETS would instead achieve emission reductions of -51 % in 2030 compared to 2005 6 . Even though this would mean outperforming the contribution of -43 % referred to above, it would still be an insufficient contribution to an overall target of at least -55 % compared to 1990. Therefore, the general objective of this initiative is to revise the ETS Directive in a manner commensurate with the 2030 climate ambition to reach at least 55 % net greenhouse gas emission reductions by 2030 below 1990 levels and with a gradual and balanced trajectory towards climate neutrality by 2050, in a cost-effective and coherent way while taking into account the need for a just transition and the need for all sectors to contribute to the EU’s climate efforts. As explained in the impact assessment, contribution of the sectors covered by the EU ETS of -61 % compared to 2005 is considered as best reflecting the 2030 Climate Target Plan results and is taken as the EU ETS ambition contributing to an overall target of at least -55 % compared to 1990. Increasing the EU ETS’s environmental contribution entails adjusting primarily the total number of allowances issued under the EU ETS (the ‘cap’). However, a reduced amount of allowances available to the market affects other pillars of the EU ETS and the carbon price. It impacts core principles such as the need for market stability, the protection against the risk of carbon leakage, the carefully balanced distributional effects between Member States, and the availability of funds for the increased investment needs in low-carbon technologies. At the same time as the EU ETS is brought in line with the overall target of at least -55 % compared to 1990, this increased climate ambition also needs to be reflected in the contribution to the EU’s climate efforts of sectors currently outside of the EU ETS. The impact assessment accompanying the 2030 Climate Target Plan found that in the absence of additional measures, emissions in certain sectors would not decrease as much as required to be on a path to achieve an economy-wide 55 % reduction in emissions. In fact, in maritime transport, emissions today are higher than in 1990, and maritime transport emissions are expected to grow further in a business-as-usual scenario . All pathways assessed as part of the 2030 Climate Target Plan and the Sustainable and Smart Mobility Strategy 7 envisage 80-82 % emissions reductions from international shipping by 2050 relative to 1990 (equivalent to 88-89 % emissions reductions relative to 2008) 8 , in order to be consistent with the increased level of climate ambition. Therefore, the European Commission undertook the commitment to extend the EU ETS to maritime transport as part of a basket of EU measures to address emissions from maritime transport , along with action agreed within the IMO. In this context, the Commission welcomes the progress that the European Parliament and the Council have made since 2019 on the proposal to amend Regulation (EU) 2015/757 9 in order to take appropriate account of the global data collection system for ship fuel oil consumption data ( COM(2019) 38 final) and the Commission takes note of the European Parliament’s Plenary support for the extension of the EU’s Emissions Trading System (EU ETS) to cover maritime transport emissions from 2023. Emissions from maritime transport should be included in the existing emissions trading system. To ensure a smooth transition, a phase-in period should be introduced where shipping companies would only have to surrender allowances for a portion of their verified emissions, gradually rising to 100 % over 4 years. As only around 90 million tons of CO 2 would be added through the extension to maritime transport to the existing ETS, the impact on the availability of allowances for other sectors covered would remain limited. To take into account the inclusion of the maritime sector in the EU ETS, Regulation (EU) 2015/757 should be amended, in particular as regards the reporting of aggregated emissions data at company level and considering the role of administering authorities in respect of shipping companies. These amendments complement those proposed in COM(2019) 38 final. As specified in the 2030 Climate Target Plan, the building sector is currently responsible directly and indirectly for 36 % of energy-related greenhouse gas emissions in the EU and has a large cost-effective potential to reduce emissions. More than half of those emissions are already covered by the existing ETS, notably the provision of electricity for use in buildings and most emissions of district heating. However, many homes are still heated with outdated systems that use polluting fossil fuels such as coal and oil. The sector of road transport also has a significant cost-effective reduction potential. Today, road transport accounts for a fifth of the EU’s greenhouse gas emissions and increased its emissions by over a quarter since 1990. As already considered in the European Green Deal Communication, the Commission is proposing to include the building sector and road transport into emissions trading. The coverage of these sectors by emissions trading, when put in the context of other appropriate regulatory and investment measures for the sectors in question, would provide for increased and more harmonised economic incentives to reduce emissions across these sectors in the EU and increased certainty of delivery of the emission reductions for those sectors. Emissions trading for the buildings and road transport sectors should be introduced through separate but adjacent emissions trading. This will avoid any disturbance of the well-functioning emissions trading system for stationary installations and aviation, given the different reduction potentials in those sectors and different factors that influence the demand. Any possible merger of the two systems should be assessed only after a few years of functioning of the new emissions trading, based on experience. The extension to buildings and road transport requires an upstream approach to regulated entities. Market stability is crucial for the EU ETS to function correctly to achieve its targets. To ensure market stability, Decision (EU) 2015/1814 10 established the market stability reserve (MSR). It began operating in January 2019. The objectives of the MSR are to tackle historical supply-demand imbalances and to make the EU ETS more resilient to major imbalances. The mechanism must preserve regulatory stability and ensure long-term predictability. Article 3 of the Decision requires the Commission to review the functioning of the reserve within three years of the start of the operation. This review needs to be considered together with the effects for market stability of increasing the ambition of the EU ETS, so the necessary amendments to the reserve are proposed together with the amendments to the EU ETS with this proposal. In this context, this proposal, as part of the Fit for 55 package, has the following specific objectives: – strengthening the EU ETS in its current scope in order to provide the appropriate contribution to an overall target of at least -55 % GHG emissions compared to 1990; – ensuring continued effective protection for the sectors exposed to a significant risk of carbon leakage while incentivising the uptake of low-carbon technologies; – addressing the distributional and social effects of this transition, by reviewing the use of auctioning revenues and the size and functioning of the low-carbon funding mechanisms; – ensuring that the other sectors than those currently included in the EU ETS contribute cost-effectively to the emission reductions needed in line with EU targets and Paris Agreement commitments notably by including emissions from maritime transport and emissions from buildings and road transport under the rules of the EU ETS while ensuring synergies with other policies targeting those sectors; – reviewing the monitoring, reporting and verification system of CO 2 emissions from maritime transport to take into account the inclusion of the maritime transport sector in the EU ETS; – reviewing the market stability reserve in line with the corresponding legal obligation and examining possible amendments to its design, to fulfil the legal objectives in the MSR decision and to address any issues that may be raised in the context of the increased ambition.