The European Emissions Trading System (EU ETS) is a cornerstone of EU climate policy and an effective instrument for reducing greenhouse gas emissions. It covers installations in the energy-intensive industry and energy sectors, which account for about 40% of European emissions. In addition to the 27 EU member states, Iceland, Norway, and Liechtenstein are also part of the alliance.
The EU ETS was introduced in 2005 to reduce emissions across sectors and promote investments in environmentally friendly technologies. Based on the “Cap and Trade” principle, it sets a cap on emissions, allows the trading of emission allowances on platforms such as the European Energy Exchange (EEX), and creates incentives for emission reduction.
Achievements, Challenges and Reform “Fit-for-55”
Despite initial criticism, the EU ETS has significantly contributed to emission reduction. Emissions in Europe decreased by about 38% by 2022 compared to 2005. However, challenges such as an excess of free allowances and the shifting of emissions abroad persist.
Despite previous successes, further adjustments are needed to achieve the necessary emissions reductions. Particularly, the limited sector coverage and issues like carbon leakage remain significant challenges. The 2023 reforms under the “Fit-for-55” package and the introduction of the Carbon Border Adjustment Mechanism aim to counteract these issues. They introduce new requirements for companies and are crucial for achieving climate goals.
Now is the time for companies to act proactively. Businesses must adapt to the tightened regulations by fulfilling their compliance and reporting obligations. At the same time, they should develop and implement decarbonization strategies to effectively address rising CO2 prices and secure competitive advantages.
As a consulting firm, Multiversum assists companies in positioning themselves in this new era. We not only provide support in meeting compliance and reporting obligations, but also have extensive experience in the field of decarbonization. With effective reduction measures, we help companies combat climate change and optimally prepare for rising CO2 prices.
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