• Why increasing ambition under the Effort Sharing Regulation is unavoidable

    In its Communication on stepping up the EU’s 2030 climate ambition, the Commission indicated that it is looking into an extension of emissions trading to road transport and buildings and the consequent weakening or even phasing out of the ESR. T&E thinks this is a high risk, low reward strategy. This briefing explains what these risks are for each of the policy options on the table and proposes an alternative approach to the 2030 climate architecture.

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    In December 2020, all EU member States agreed to an increased climate target of at least -55% net emissions reduction by 2030. The logical consequence is that all member states now contribute to this new EU-wide target by increasing the ambition of their own national policies. This should be formalised through an increase of the legally binding national targets under the Effort Sharing Regulation (ESR).

    The European Commission has however indicated that it is looking into a repeal of the ESR and an extension of emissions trading to road transport and buildings. T&E thinks that this is a high risk, low reward strategy. Once included, member states would no longer have domestic responsibility for these emissions.

    A more sensible way to introduce a carbon pricing instrument in the road transport and buildings sectors would be to design it as a supportive policy that supports member states to more easily comply with their Effort Sharing targets. The new ETS for road transport and buildings would then drive additional emissions reductions in parallel to national measures, but it would not serve as the main instrument responsible for compliance with the 2030 target. That means that a price control mechanism can be introduced to prevent prices from spiralling out of control. An incentive to adopt additional EU measures (such as more ambitious vehicle CO2 standards) remains in place, as these could further alleviate the work that needs to be done through national policies.