REGULATORY SCRUTINY BOARD OPINION Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC and Decision (EU) 2015/1814, as regards the Union’s increased climate ambition for 2030 to strengthen the EU Emissions Trading System and extend it

EUROPEAN COMMISSION
19/4/2021
SEC(2021) 551
REGULATORY SCRUTINY BOARD OPINION
Proposal for a Directive of the European Parliament and of the Council
amending Directive 2003/87/EC and Decision (EU) 2015/1814, as
regards the Union’s increased climate ambition for 2030 to strengthen
the EU Emissions Trading System and extend it
{COM(2021) 551}
{SWD(2021) 601)
{SWD(2021) 602}
Europaudvalget 2021
KOM (2021) 0551 - SEK-dokument
Offentligt
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This opinion concerns a draft impact assessment which may differ from the final version.
Commission européenne, B-1049 Bruxelles - Belgium. Office: BERL 08/010. E-mail: regulatory-scrutiny-board@ec.europa.eu
EUROPEAN COMMISSION
Regulatory Scrutiny Board
Brussels,
RSB
Opinion
Title: Impact assessment / Updating the EU Emissions Trading System
Overall opinion: POSITIVE WITH RESERVATIONS
(A) Policy context
To achieve climate neutrality by 2050, the Commission has proposed to reduce greenhouse
gas emissions by at least 55% by 2030 compared to 1990. This impact assessment analyses
how a revised EU emissions trading system (ETS) can contribute to this objective.
The ETS sets a cap on greenhouse gas emissions of the included sectors. It organises a
market for trading these emission rights to create incentives to reduce emissions where
these are most cost-effective. The report analyses ways to strengthen the current system to
meet the more ambitious climate targets. This includes the first review of the market
stability reserve after three years of functioning. The report also assesses expanding the use
of emissions trading to other sectors, including buildings and maritime and road transport.
The ETS has proven to be successful in reducing greenhouse gas emissions. However,
carbon pricing does not address all barriers to the deployment of low and zero emissions
solutions. Other complementary policy actions, notably transport, energy and other sectoral
policies, are needed to trigger further investments in clean energy technologies and
infrastructure and to overcome financing difficulties for low-income households.
(B) Summary of findings
The Board notes the useful additional information provided in advance of the
meeting and commitments to make changes to the report. It also notes the significant
efforts to coordinate and ensure coherence across the ‘Fit-for-55’ initiatives.
However, the report still contains significant shortcomings. The Board gives a
positive opinion with reservations because it expects the DG to rectify the following
aspects:
(1) The report is too technical and too long. It does not clearly inform the political
choices for the decision makers. The report does not sufficiently assess the
interaction of the proposed initiative with the parallel initiatives pursuing similar
objectives.
(2) The report does not explain well enough what the extensions of the ETS to the
maritime sector and sectors currently covered by the Effort Sharing Regulation
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(ESR) will contribute to the general objective. The report does not sufficiently
elaborate the pros and cons of the options.
(3) The report does not clearly identify who will be affected and how. It does not
present the main costs and benefits of the preferred options. Views of the
different stakeholder groups are absent from the report.
(C) What to improve
1) The report should be more accessible to inform the key policy choices. The narrative
should be less technical, shorter and be readable without an extensive prior knowledge of
European climate policies. The report should make particular effort to improve the
presentation of the preferred option(s), making the various trade-offs and open choices
clear for policy-makers.
2) While the report should be self-standing, it should highlight the significant
interlinkages with other ‘Fit-for-55’ initiatives. It should be clear on what the Climate
Target Plan has decided and which ‘sectoral’ choices are still left open. It should elaborate
on the consequences of deviating from the ‘optimal balance’ between regulatory and
pricing instruments. The report should further clarify coherence with the possible Carbon
Border Adjustment Mechanism (CBAM), in particular the auctioning share for trade-
exposed and energy-intensive sectors. It should explain to what extent the ETS revision
depends on the CBAM initiative. It should also clarify to what extent it takes into account
CO2 reductions generated by a possible revision of the Energy Taxation Directive.
Moreover, it should explain why aviation is dealt with in another initiative.
3) The report should strengthen the rationale why the ETS should be extended to the
maritime sectors and (part of) the ESR sectors. It should reinforce the analysis of the
related problems and clarify what and how much these individual extensions would add to
other existing or planned regulatory initiatives, such as the CO2 emissions for cars and
vans and the FuelEU maritime initiative. The report should better argue the choice of ETS
coverage in the current ESR sectors. It should discuss whether a selective coverage of ESR
sectors in the ETS might lead to increased complexity or distortions, as sectors would fall
under different climate policy regimes.
4) The report should systematically take into account the comments made by the different
stakeholder groups and confront them with the findings of the analysis throughout the
report.
5) The methodological section (in the annex), including methods, key assumptions, and
baseline, should be harmonised as much as possible across all ‘Fit for 55’ initiatives. Key
methodological elements and assumptions should be included concisely in the main report
under the baseline section and the introduction to the options. The report should refer
explicitly to uncertainties linked to the modelling. Where relevant, the methodological
presentation should be adapted to this specific initiative.
6) Annex 3 should follow the standard format and present a summary of costs and
benefits with all key information, including quantified estimates.
Some more technical comments have been sent directly to the author DG.
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(D) Conclusion
The DG may proceed with the initiative.
The DG must revise the report in accordance with the Board’s findings before
launching the interservice consultation.
Full title Updating the EU Emissions Trading System
Reference number Plan/2020/8684
Submitted to RSB on 10 March 2021
Date of RSB meeting 14 April 2021
Electronically signed on 19/04/2021 16:42 (UTC+02) in accordance with article 11 of Commission Decision C(2020) 4482